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TABLE OF CONTENTS
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AIM Variable Insurance Funds, Inc.
AIM V.I. Capital Appreciation Fund..................................... 2
AIM V.I. Diversified Income Fund....................................... 14
AIM V.I. Global Utilities Fund......................................... 26
AIM V.I. Government Securities Fund.................................... 37
AIM V.I. Growth Fund................................................... 44
AIM V.I. Growth and Income Fund........................................ 56
AIM V.I. International Equity Fund..................................... 68
AIM V.I. Money Market Fund............................................. 79
AIM V.I. Value Fund.................................................... 85
Directors and Officers of the Funds.................................... Inside
Back
Cover
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The Managers' Overview
1996 CHALLENGED MID-CAP STOCKS
A roundtable discussion with the Fund management team for
AIM V.I. Capital Appreciation Fund for the fiscal year ended December 31, 1996.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. THE MARKET HAS FAVORED LARGE- Q. HOW DID INVESTORS REACT IN Top 10 Equity Holdings
COMPANY STOCKS SINCE OCTOBER THAT ENVIRONMENT? As of 12/31/96
1995. DID THAT AFFECT AIM V.I. A. Uncertainty creates volatile markets,
CAPITAL APPRECIATION FUND? and investors gravitated to stocks in 1. Microsoft Corp.
A. The market's preference for large- larger companies with more predictable 2. Intel Corp.
company stocks is evidenced by the earnings. As a result, large-company 3. 3Com Corp.
22.95% return for the Standard & Poor's stocks generally have outperformed 4. Cardinal Health, Inc.
Composite Index of 500 Stocks (S&P 500) smaller company stocks. However, it has 5. Parametric Technology Corp.
compared to the 16.50% total return become apparent recently that small- 6. Cisco Systems, Inc.
posted for the Russell 2000 Index of small- company stocks have grown more appeal- 7. Columbia/HCA Healthcare Corp.
company stocks and the 19.20% total ing as earnings reports show 8. Cascade Communications Corp.
return of the Standard & Poor's Mid-Cap surprisingly strong growth. 9. Ascend Communications, Inc.
Index (S&P 400). 10. HealthSouth Corp.
The Fund's respectable total return of Q. HOW DID THESE FACTORS AFFECT
17.58% for the year ended December 31, THE FUND? Please keep in mind that the Fund's
1996, reflected that trend. It also reflected A. Due to its larger concentration in portfolio composition is subject to
the volatile behavior of the technology technology stocks, the Fund was vulner- change and there is no assurance the
sector, which suffered a significant decline able when the technology sector suffered Fund will continue to hold any
in the summer of 1996. a broad-based decline beginning in the particular security.
summer. Technology stocks comprised
Q. WHAT FACTORS HAVE PRESSURED roughly 40% of the portfolio as the Q. WHAT'S THE OUTLOOK FOR THE
THE PERFORMANCE OF SMALL-COMPANY fiscal year began. TECHNOLOGY SECTOR?
STOCKS? A. Going forward, the Fund noted a
A. As the market leaders during 1995, Q. WHAT STRATEGIES DID THE number of positive factors in selected
small-company stocks were more vulner- FUND USE TO STRENGTHEN ITS PERFOR- technology areas. PC makers benefit
able to possible changes in the business MANCE? from the decline in prices of semi-
cycle. There was an ongoing concern over A. The Fund's strong rebound in 1996 conductors and other components.
the pace of economic growth and the was accomplished with a more broadly Microsoft's Windows NT has the poten-
possibility of rising interest rates. Higher diversified portfolio. By April 1996, the tial to launch another major upgrade
interest rates increase borrowing costs, technology weighting had been pared to cycle in spring 1997 that will bene-
and that can have a stronger impact on the approximately 37%, and then to 24% fit PC makers and software developers
profits of smaller companies. by the end of the reporting period. alike.
While later reports indicated the The Fund also repositioned its empha-
economy had slowed to a moderate pace, sis from semiconductor producers to Q. HOW WAS THE FUND POSITIONED AT THE
some economists anticipated that higher computer software and networking END OF THE FISCAL YEAR?
interest rates remained a possibility. companies. The Fund emphasized market A. The Fund continued to hold a large
Investors also were concerned that leaders-its top three holdings as of number of stocks-approximately 315 as
corporate earnings would fall short of December 31, 1996, were Microsoft of December 31, 1996, spread over 51
the brisk pace of 1995, and small compa- Corp., Intel Corp., and 3Com Corp. industry categories. The largest
nies had posted stunning profits that The Fund increased its holdings in concentrations were little changed
seemed hard to match in 1996. That was other sectors including specialty retailers from April 1996. Following tech-
particularly true for many technology and medical services providers. nology, the Fund maintained its
companies, and many stocks in the weighting in health-care stocks at
technology sector fell sharply in the fall of roughly 18%, and increased its
1995 and the summer of 1996. holdings in retail stores and con-
sumer cyclicals to 23%.
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AIM V.I. CAPITAL APPRECIATION FUND
2
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Q. WHAT WERE SOME OF THE SIGNIFICANT Q. YOU CONTINUE TO MAINTAIN A Q. WHAT IS YOUR OUTLOOK FOR THE
CHANGES IN THE RETAIL SECTOR DURING SIGNIFICANT EMPHASIS IN HEALTH-CARE MARKET IN 1997?
THE REPORTING PERIOD? COMPANIES. WHAT DO YOU SEE AS THE
MAIN THEMES?
A. Earnings in the retail sector A. Consolidated efforts continue A. The bull market for stocks
have been surprisingly strong, and in the health-care industry, and marked its sixth year in October
they continue to grow at an attractive intense competition has begun to 1996, making it the longest in
pace. The Fund bolstered its holdings drive out many of the smaller, history. The market's performance
in stronger, name-brand stores that less-experienced players, particularly for the year was also marked by
dominate their market niche: in the physician practice management stunning volatility, and analysts
Consolidated Stores Corp., Staples Inc., area. The Fund focused on three major disagree on how long its remarkable
Tech Data Corp., and The Sports areas in the health-care segment where advance can continue.
Authority, Inc. there appears to be attractive potential Some consider the market over-
for earnings growth: preventive priced after its huge runup in
maintenance, assisted living, and values, particularly in the past
hospital systems administration. two years. Others note that
Among the Fund's strongest companies continue to report
performers in those segments were favorable earnings, even with
Columbia/HCA Healthcare and Health- slower economic growth.
South Corp. Other strong performers The pace of growth in
were medical instruments and corporate earnings will be the key
products maker Sybron International in 1997. Through most of the 1990s,
Corp. and drugmaker Cardinal Health corporate earnings growth has been
Inc. above historic averages. As
economic growth continues at a
slower pace, it is likely that
corporate earnings will slow to a
more moderate rate, which may
transalate into more conservative
performance for stocks.
Growth of a $10,000 Investment
From 5/5/93 - 12/31/96
AIM V.I. Capital S&P 500 Lipper Capital Appreciation
Appreciation Fund Stock Index Fund Index
(In thousands)
<S> <C> <C> <C>
5/5/93 $10,000 $10,000 $10,000
7/30/93 10,390 10,155 10,542
10/29/93 11,440 10,675 11,449
1/31/94 12,590 11,062 11,866
4/29/94 11,939 10,430 11,100
7/29/94 11,379 10,681 10,929
10/31/94 12,620 11,088 11,547
1/31/95 12,097 11,123 11,312
4/28/95 13,623 12,247 12,242
7/31/95 16,534 13,462 13,937
10/31/95 16,886 14,011 14,175
1/31/96 16,769 15,412 15,086
4/30/96 18,727 15,937 16,281
7/31/96 17,000 15,678 15,114
10/31/96 19,028 17,376 16,491
12/31/96 19,540 18,344 17,018
AVERAGE ANNUAL TOTAL RETURN Past performance cannot guarantee comparable
As of 12/31/96 future results.
1 Year 17.58%
Inception (5/5/93) 20.10
The performance figures shown represent the AIM V.I. Capital Appreciation Fund
and are not intended to reflect actual annuity values, and do not reflect
charges at the separate account level which, if applied, would lower the
performance results. The Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in the net asset value. The
Fund's investment return and principal value will fluctuate so that Fund shares,
when redeemed, may be worth more or less than their original cost. Source:
Towers Data Systems HYPO--Registered Trademark--.
The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of the
stock market in general. The unmanaged Lipper Capital Appreciation Fund Index
represents an average of the performance of the 30 largest capital appreciation
mutual funds. Source: Towers Data Systems HYPO--Registered Trademark--.
As investment cannot be made in the indexes listed. Index results include
reinvested dividends.
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---------------
The pace of growth in corporate
earnings will be the key in 1997.
---------------
AIM V.I. CAPITAL APPRECIATION FUND
3
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SCHEDULE OF INVESTMENTS
December 31, 1996
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MARKET
SHARES VALUE
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COMMON STOCKS - 87.73%
ADVERTISING/BROADCASTING - 1.11%
American Radio Systems Corp.(a) 10,000 $ 272,500
- ------------------------------------------------------------------
CanWest Global Communications Corp. (Canada) 59,700 611,925
- ------------------------------------------------------------------
Catalina Marketing Corp.(a) 3,300 181,912
- ------------------------------------------------------------------
Chancellor Corp. - Class A(a) 13,000 308,750
- ------------------------------------------------------------------
Clear Channel Communications, Inc.(a) 44,600 1,611,175
- ------------------------------------------------------------------
Jacor Communications, Inc.(a) 27,500 752,813
- ------------------------------------------------------------------
Paxson Communications Corp.(a) 20,000 157,500
- ------------------------------------------------------------------
True North Communications, Inc. 9,000 196,875
- ------------------------------------------------------------------
4,093,450
- ------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES - 0.10%
Mark IV Industries, Inc. 16,170 365,846
- ------------------------------------------------------------------
BANKING - 0.55%
Bank of Boston Corp. 31,900 2,049,575
- ------------------------------------------------------------------
BIOTECHNOLOGY - 0.43%
AMGEN, Inc.(a) 29,500 1,604,063
- ------------------------------------------------------------------
BUSINESS SERVICES - 0.91%
AccuStaff, Inc.(a) 29,300 618,963
- ------------------------------------------------------------------
APAC Teleservices, Inc.(a) 6,000 230,250
- ------------------------------------------------------------------
Corrections Corp. of America(a) 1,900 58,188
- ------------------------------------------------------------------
CUC International, Inc.(a) 23,700 562,875
- ------------------------------------------------------------------
Equifax, Inc. 14,000 428,750
- ------------------------------------------------------------------
Healthcare COMPARE Corp.(a) 13,700 580,537
- ------------------------------------------------------------------
Paychex, Inc. 9,100 468,081
- ------------------------------------------------------------------
Romac International, Inc.(a) 20,000 440,000
- ------------------------------------------------------------------
3,387,644
- ------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.72%
Agrium, Inc. (Canada) 30,000 412,500
- ------------------------------------------------------------------
Airgas, Inc.(a) 48,500 1,067,000
- ------------------------------------------------------------------
IMC Global, Inc. 30,000 1,173,750
- ------------------------------------------------------------------
2,653,250
- ------------------------------------------------------------------
COMPUTER MINI/PCS - 3.00%
COMPAQ Computer Corp.(a) 39,000 2,895,750
- ------------------------------------------------------------------
Dell Computer Corp.(a) 47,600 2,528,750
- ------------------------------------------------------------------
Hewlett-Packard Co. 14,400 723,600
- ------------------------------------------------------------------
Rational Software Corp.(a) 42,400 1,677,450
- ------------------------------------------------------------------
Sun Microsystems, Inc.(a) 127,800 3,282,863
- ------------------------------------------------------------------
11,108,413
- ------------------------------------------------------------------
COMPUTER NETWORKING - 5.84%
ACT Networks, Inc.(a) 13,600 496,400
- ------------------------------------------------------------------
Ascend Communications, Inc.(a) 54,500 3,385,813
- ------------------------------------------------------------------
Cabletron Systems, Inc.(a) 58,000 1,928,500
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MARKET
SHARES VALUE
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COMPUTER NETWORKING - (CONTINUED)
Cascade Communications Corp.(a) 63,700 $ 3,511,462
- ------------------------------------------------------------------
Cisco Systems, Inc.(a) 59,100 3,760,237
- ------------------------------------------------------------------
ECI Telecommunications Ltd. Designs (Israel) 22,300 473,875
- ------------------------------------------------------------------
FORE Systems, Inc.(a) 46,800 1,538,550
- ------------------------------------------------------------------
Newbridge Networks Corp. (Canada)(a) 41,000 1,158,250
- ------------------------------------------------------------------
Shiva Corp.(a) 5,800 202,275
- ------------------------------------------------------------------
Sync Research, Inc.(a) 14,700 202,125
- ------------------------------------------------------------------
3Com Corp.(a) 60,000 4,402,500
- ------------------------------------------------------------------
Xircom, Inc.(a) 25,000 543,750
- ------------------------------------------------------------------
21,603,737
- ------------------------------------------------------------------
COMPUTER PERIPHERALS - 2.32%
Adaptec, Inc.(a) 44,800 1,792,000
- ------------------------------------------------------------------
American Power Conversion Corp.(a) 18,400 501,400
- ------------------------------------------------------------------
EMC Corp.(a) 45,000 1,490,625
- ------------------------------------------------------------------
Microchip Technology, Inc.(a) 41,400 2,106,225
- ------------------------------------------------------------------
U.S. Robotics Corp.(a) 37,700 2,714,400
- ------------------------------------------------------------------
8,604,650
- ------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 11.96%
Affiliated Computer Services, Inc.(a) 22,800 678,300
- ------------------------------------------------------------------
Baan Co., N.V. (Netherlands)(a) 30,300 1,052,925
- ------------------------------------------------------------------
BDM International Inc.(a) 6,000 325,500
- ------------------------------------------------------------------
BISYS Group, Inc. (The)(a) 12,000 444,750
- ------------------------------------------------------------------
BMC Software, Inc.(a) 62,000 2,565,250
- ------------------------------------------------------------------
Cadence Design Systems, Inc.(a) 20,350 808,913
- ------------------------------------------------------------------
CBT Group PLC-ADR (Ireland)(a) 900 48,825
- ------------------------------------------------------------------
Ceridian Corp.(a) 28,000 1,134,000
- ------------------------------------------------------------------
Computer Associates International, Inc. 64,350 3,201,413
- ------------------------------------------------------------------
Computer Sciences Corp.(a) 19,700 1,617,863
- ------------------------------------------------------------------
Compuware Corp.(a) 31,000 1,553,875
- ------------------------------------------------------------------
CSG Systems International, Inc.(a) 15,100 232,162
- ------------------------------------------------------------------
DST Systems, Inc.(a) 27,800 872,225
- ------------------------------------------------------------------
Electronic Arts, Inc.(a) 25,700 769,394
- ------------------------------------------------------------------
First Data Corp. 22,500 821,250
- ------------------------------------------------------------------
HBO & Co. 28,144 1,671,050
- ------------------------------------------------------------------
HPR, Inc.(a) 13,600 187,000
- ------------------------------------------------------------------
IDX Systems Corp.(a) 5,500 157,437
- ------------------------------------------------------------------
Intuit, Inc.(a) 24,400 768,600
- ------------------------------------------------------------------
McAfee Associates, Inc.(a) 46,300 2,037,200
- ------------------------------------------------------------------
Medic Computer Systems, Inc.(a) 8,200 330,562
- ------------------------------------------------------------------
Microsoft Corp.(a) 82,900 6,849,612
- ------------------------------------------------------------------
National Data Corp. 22,500 978,750
- ------------------------------------------------------------------
Network General Corp.(a) 67,000 2,026,750
- ------------------------------------------------------------------
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AIM V.I. CAPITAL APPRECIATION FUND
4
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MARKET
SHARES VALUE
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COMPUTER SOFTWARE/SERVICES - (CONTINUED)
Oracle Corp.(a) 60,875 $ 2,541,531
- ----------------------------------------------------------------
Parametric Technology Co.(a) 74,200 3,812,025
- ----------------------------------------------------------------
Physician Computer Network, Inc.(a) 42,500 361,250
- ----------------------------------------------------------------
Pure Atria Corp.(a) 2,300 56,925
- ----------------------------------------------------------------
Sterling Commerce, Inc.(a) 54,955 1,937,164
- ----------------------------------------------------------------
Sterling Software, Inc.(a) 16,800 531,300
- ----------------------------------------------------------------
Structural Dynamics Research Corp.(a) 19,400 388,000
- ----------------------------------------------------------------
SunGard Data Systems, Inc.(a) 17,600 695,200
- ----------------------------------------------------------------
Synopsys, Inc.(a) 44,500 2,058,125
- ----------------------------------------------------------------
Systemsoft Corp.(a) 3,400 50,575
- ----------------------------------------------------------------
Tecnomatix Technologies Ltd. (Israel)(a) 8,600 227,900
- ----------------------------------------------------------------
Transition Systems, Inc.(a) 600 8,475
- ----------------------------------------------------------------
Wind River Systems(a) 10,000 473,750
- ----------------------------------------------------------------
44,275,826
- ----------------------------------------------------------------
CONGLOMERATES - 0.68%
Corning, Inc. 27,300 1,262,625
- ----------------------------------------------------------------
Tyco International Ltd. 13,968 738,558
- ----------------------------------------------------------------
U.S. Industries, Inc.(a) 15,000 515,625
- ----------------------------------------------------------------
2,516,808
- ----------------------------------------------------------------
CONSUMER NON-DURABLES - 0.06%
Central Garden and Pet Co.(a) 10,000 210,625
- ----------------------------------------------------------------
COSMETIC & TOILETRIES - 0.12%
Rexall Sundown, Inc.(a) 16,300 443,156
- ----------------------------------------------------------------
ELECTRONIC COMPONENT/MISCELLANEOUS - 1.11%
AMETEK Inc. 5,000 111,250
- ----------------------------------------------------------------
Berg Electronics Corp.(a) 13,600 399,500
- ----------------------------------------------------------------
BMC Industries, Inc. 13,700 431,550
- ----------------------------------------------------------------
Checkpoint Systems, Inc.(a) 10,000 247,500
- ----------------------------------------------------------------
Methode Electronics, Inc. - Class A 9,150 185,288
- ----------------------------------------------------------------
Molex, Inc. - Class A 3,906 139,151
- ----------------------------------------------------------------
Raychem Corp. 10,400 833,300
- ----------------------------------------------------------------
SCI Systems, Inc.(a) 10,600 473,025
- ----------------------------------------------------------------
Symbol Technologies, Inc.(a) 17,200 761,100
- ----------------------------------------------------------------
Thermo Instrument Systems, Inc.(a) 16,100 533,312
- ----------------------------------------------------------------
4,114,976
- ----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 0.17%
Imperial Credit Industries, Inc.(a) 30,000 630,000
- ----------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 4.18%
Aames Financial Corp. 23,500 843,062
- ----------------------------------------------------------------
Beneficial Corp. 10,900 690,787
- ----------------------------------------------------------------
Capital One Financial Corp. 42,200 1,519,200
- ----------------------------------------------------------------
Concord EFS, Inc.(a) 20,000 565,000
- ----------------------------------------------------------------
Credit Acceptance Corp.(a) 29,300 688,550
- ----------------------------------------------------------------
First USA, Inc. 23,200 803,300
- ----------------------------------------------------------------
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MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT) - (CONTINUED)
Green Tree Financial Corp. 62,800 $ 2,425,650
- ---------------------------------------------------------------
Household International, Inc. 19,600 1,808,100
- ---------------------------------------------------------------
MBNA Corp. 43,750 1,815,625
- ---------------------------------------------------------------
Money Store, Inc. (The) 40,000 1,105,001
- ---------------------------------------------------------------
Olympic Financial Ltd.(a) 42,200 606,625
- ---------------------------------------------------------------
PMT Services, Inc.(a) 29,500 516,250
- ---------------------------------------------------------------
Southern Pacific Funding Corp.(a) 3,000 93,375
- ---------------------------------------------------------------
Student Loan Marketing Association 12,000 1,117,500
- ---------------------------------------------------------------
SunAmerica, Inc. 20,000 887,500
- ---------------------------------------------------------------
15,485,525
- ---------------------------------------------------------------
FINANCE (SAVINGS & LOAN) - 0.18%
Washington Mutual, Inc. 15,200 658,350
- ---------------------------------------------------------------
FOOD/PROCESSING - 0.19%
Richfood Holdings, Inc. 29,450 714,163
- ---------------------------------------------------------------
FUNERAL SERVICES - 1.05%
Service Corp. International 113,900 3,189,200
- ---------------------------------------------------------------
Stewart Enterprises, Inc. - Class A 20,250 688,500
- ---------------------------------------------------------------
3,877,700
- ---------------------------------------------------------------
FURNITURE - 0.25%
Leggett & Platt, Inc. 26,500 917,563
- ---------------------------------------------------------------
GAMING - 0.95%
Circus Circus Enterprises(a) 37,500 1,289,063
- ---------------------------------------------------------------
GTECH Holdings Corp.(a) 21,300 681,600
- ---------------------------------------------------------------
International Game Technology 66,200 1,208,150
- ---------------------------------------------------------------
Trump Hotels & Casino Resorts, Inc.(a) 28,600 343,200
- ---------------------------------------------------------------
3,522,013
- ---------------------------------------------------------------
HOME BUILDING - 0.02%
Oakwood Homes Corp. 4,000 91,500
- ---------------------------------------------------------------
HOTELS/MOTELS - 1.17%
Choice Hotels International, Inc.(a) 45,500 801,937
- ---------------------------------------------------------------
Doubletree Corp.(a) 17,700 796,500
- ---------------------------------------------------------------
HFS, Inc.(a) 28,100 1,678,975
- ---------------------------------------------------------------
Promus Hotel Corp.(a) 18,750 555,469
- ---------------------------------------------------------------
Sun International Hotels Ltd.(a) 13,500 492,750
- ---------------------------------------------------------------
4,325,631
- ---------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.58%
Compdent Corp.(a) 15,900 560,475
- ---------------------------------------------------------------
Conseco Inc. 15,000 956,250
- ---------------------------------------------------------------
United Companies Financial Corp. 24,500 652,312
- ---------------------------------------------------------------
2,169,037
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTIES) - 0.98%
CapMAC Holdings, Inc. 25,900 857,938
- ---------------------------------------------------------------
MGIC Investment Corp. 35,300 2,682,800
- ---------------------------------------------------------------
Progressive Corp. 1,600 107,800
- ---------------------------------------------------------------
3,648,538
- ---------------------------------------------------------------
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5
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MARKET
SHARES VALUE
<S> <C> <C>
LEISURE & RECREATION - 0.87%
Callaway Golf Co. 37,000 $ 1,063,750
- ------------------------------------------------------------------------
Harley-Davidson, Inc. 35,700 1,677,900
- ------------------------------------------------------------------------
Mattel, Inc. 9,375 260,156
- ------------------------------------------------------------------------
Speedway Motorsports, Inc.(a) 9,900 207,900
- ------------------------------------------------------------------------
3,209,706
- ------------------------------------------------------------------------
MACHINE TOOLS - 0.23%
Precision Castparts Corp. 17,000 843,625
- ------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 0.54%
Pentair, Inc. 14,500 467,625
- ------------------------------------------------------------------------
Thermo Electron Corp.(a) 37,300 1,538,625
- ------------------------------------------------------------------------
2,006,250
- ------------------------------------------------------------------------
MEDICAL (DRUGS) - 2.65%
Cardinal Health, Inc. 72,525 4,224,581
- ------------------------------------------------------------------------
Curative Technologies, Inc.(a) 8,500 235,344
- ------------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 25,000 1,193,750
- ------------------------------------------------------------------------
Elan Corp. PLC-ADR (Ireland)(a) 57,700 1,918,525
- ------------------------------------------------------------------------
Express Scripts, Inc. - Class A(a) 21,800 782,075
- ------------------------------------------------------------------------
Jones Medical Industries, Inc. 23,600 864,350
- ------------------------------------------------------------------------
Parexel International Corp.(a) 6,200 320,075
- ------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR (Israel) 5,300 266,325
- ------------------------------------------------------------------------
9,805,025
- ------------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS) - 4.86%
Advanced Technology Laboratories, Inc.(a) 15,000 465,000
- ------------------------------------------------------------------------
Boston Scientific Corp.(a) 33,280 1,996,800
- ------------------------------------------------------------------------
Dentsply International, Inc. 14,800 703,000
- ------------------------------------------------------------------------
Gulf South Medical Supply, Inc.(a) 33,100 848,187
- ------------------------------------------------------------------------
IDEXX Laboratories Inc.(a) 25,300 910,800
- ------------------------------------------------------------------------
Invacare Corp. 27,400 753,500
- ------------------------------------------------------------------------
Medtronic, Inc. 14,000 952,000
- ------------------------------------------------------------------------
Nellcor Puritan Bennet, Inc.(a) 13,100 286,563
- ------------------------------------------------------------------------
Omnicare, Inc. 74,700 2,399,738
- ------------------------------------------------------------------------
Physician Sales & Service, Inc.(a) 20,000 287,500
- ------------------------------------------------------------------------
Quintiles Transnational Corp.(a) 29,900 1,980,875
- ------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 30,000 1,278,750
- ------------------------------------------------------------------------
Steris Corp.(a) 45,000 1,957,500
- ------------------------------------------------------------------------
Sybron International Corp.(a) 61,800 2,039,400
- ------------------------------------------------------------------------
Target Therapeutics, Inc.(a) 6,500 273,000
- ------------------------------------------------------------------------
U.S. Surgical Corp. 21,400 842,625
- ------------------------------------------------------------------------
17,975,238
- ------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 7.71%
American HomePatient, Inc.(a) 22,050 600,862
- ------------------------------------------------------------------------
American Medical Response, Inc.(a) 5,700 185,250
- ------------------------------------------------------------------------
American Oncology Resources, Inc.(a) 7,200 73,800
- ------------------------------------------------------------------------
ClinTrials Research Inc.(a) 25,650 583,537
- ------------------------------------------------------------------------
</TABLE>
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<CAPTION>
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES) - (CONTINUED)
Columbia/HCA Healthcare Corp. 90,720 $ 3,696,840
- ------------------------------------------------------------------------
FPA Medical Management, Inc.(a) 20,000 447,500
- ------------------------------------------------------------------------
Genesis Health Ventures, Inc.(a) 29,401 915,106
- ------------------------------------------------------------------------
Health Care & Retirement Corp.(a) 66,900 1,915,012
- ------------------------------------------------------------------------
Health Management Associates, Inc. - Class A(a) 87,712 1,973,520
- ------------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 85,900 3,317,887
- ------------------------------------------------------------------------
Lincare Holdings, Inc.(a) 30,000 1,230,000
- ------------------------------------------------------------------------
MedPartners, Inc.(a) 22,500 472,500
- ------------------------------------------------------------------------
Multicare Companies, Inc.(a) 26,200 530,550
- ------------------------------------------------------------------------
OccuSystems, Inc.(a) 11,500 310,500
- ------------------------------------------------------------------------
OrNda HealthCorp(a) 57,900 1,693,575
- ------------------------------------------------------------------------
Orthodontic Centers of America, Inc.(a) 15,000 240,000
- ------------------------------------------------------------------------
Oxford Health Plans, Inc.(a) 45,000 2,635,313
- ------------------------------------------------------------------------
PhyCor, Inc.(a) 28,800 817,200
- ------------------------------------------------------------------------
Physicians Resource Group, Inc.(a) 20,000 355,000
- ------------------------------------------------------------------------
Quorum Health Group, Inc.(a) 33,000 981,750
- ------------------------------------------------------------------------
Tenet Healthcare Corp.(a) 61,500 1,345,313
- ------------------------------------------------------------------------
Total Renal Care Holdings, Inc.(a) 28,800 1,044,000
- ------------------------------------------------------------------------
Universal Health Services, Inc. - Class B(a) 38,300 1,096,338
- ------------------------------------------------------------------------
Vencor, Inc.(a) 64,900 2,052,463
- ------------------------------------------------------------------------
28,513,816
- ------------------------------------------------------------------------
METALS (MISCELLANEOUS) - 0.39%
Potash Corp. of Saskatchewan, Inc. (Canada) 17,000 1,445,000
- ------------------------------------------------------------------------
OFFICE AUTOMATION - 0.56%
Danka Business Systems PLC-ADR (United Kingdom) 58,300 2,062,363
- ------------------------------------------------------------------------
OFFICE PRODUCTS - 0.73%
Avery Dennison Corp. 14,200 502,325
- ------------------------------------------------------------------------
Ingram Micro, Inc.(a) 39,300 903,900
- ------------------------------------------------------------------------
Reynolds & Reynolds Co. - Class A 50,000 1,300,000
- ------------------------------------------------------------------------
2,706,225
- ------------------------------------------------------------------------
OIL & GAS (DRILLING) - 0.29%
Reading & Bates Corp.(a) 40,000 1,060,000
- ------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.47%
Burlington Resources, Inc. 22,000 1,108,250
- ------------------------------------------------------------------------
Transocean Offshore Inc. 10,000 626,250
- ------------------------------------------------------------------------
1,734,500
- ------------------------------------------------------------------------
OIL & GAS (SERVICES) - 0.72%
Camco International, Inc. 20,000 922,500
- ------------------------------------------------------------------------
Energy Ventures, Inc.(a) 7,700 391,737
- ------------------------------------------------------------------------
Global Marine, Inc.(a) 65,000 1,340,625
- ------------------------------------------------------------------------
2,654,862
- ------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES - 2.78%
Baker Hughes, Inc. 28,500 983,250
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
6
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES - (CONTINUED)
BJ Services Co.(a) 14,000 $ 714,000
- -----------------------------------------------------------------------
Cooper Cameron Corp.(a) 12,000 918,000
- -----------------------------------------------------------------------
Diamond Offshore Drilling, Inc.(a) 29,600 1,687,200
- -----------------------------------------------------------------------
ENSCO International, Inc.(a) 20,000 970,000
- -----------------------------------------------------------------------
Marine Drilling Co., Inc.(a) 70,000 1,378,125
- -----------------------------------------------------------------------
Nabors Industries, Inc.(a) 15,000 288,750
- -----------------------------------------------------------------------
Pride Petroleum Services, Inc.(a) 15,500 360,375
- -----------------------------------------------------------------------
Rowan Companies, Inc.(a) 38,500 871,063
- -----------------------------------------------------------------------
Smith International, Inc.(a) 21,900 982,762
- -----------------------------------------------------------------------
Varco International, Inc.(a) 48,900 1,130,812
- -----------------------------------------------------------------------
10,284,337
- -----------------------------------------------------------------------
POLLUTION CONTROL - 0.72%
United Waste Services, Inc.(a) 29,000 996,875
- -----------------------------------------------------------------------
US Filter Corp.(a) 21,100 669,925
- -----------------------------------------------------------------------
USA Waste Services, Inc.(a) 31,300 997,688
- -----------------------------------------------------------------------
2,664,488
- -----------------------------------------------------------------------
PUBLISHING - 0.31%
Gartner Group, Inc.(a) 18,400 716,450
- -----------------------------------------------------------------------
Times Mirror Co. (The) - Class A 9,000 447,750
- -----------------------------------------------------------------------
1,164,200
- -----------------------------------------------------------------------
RESTAURANTS - 1.66%
Apple South, Inc. 30,000 405,000
- -----------------------------------------------------------------------
Applebee's International, Inc. 29,400 808,500
- -----------------------------------------------------------------------
Brinker International, Inc.(a) 35,000 560,000
- -----------------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 52,600 1,334,725
- -----------------------------------------------------------------------
Lone Star Steakhouse & Saloon, Inc.(a) 45,600 1,219,800
- -----------------------------------------------------------------------
Outback Steakhouse, Inc.(a) 32,100 858,675
- -----------------------------------------------------------------------
Planet Hollywood International, Inc. - Class A(a) 20,200 398,950
- -----------------------------------------------------------------------
Rainforest Cafe, Inc.(a) 7,500 176,250
- -----------------------------------------------------------------------
Starbucks Corp.(a) 13,200 377,850
- -----------------------------------------------------------------------
6,139,750
- -----------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 2.26%
American Stores Co. 31,000 1,267,125
- -----------------------------------------------------------------------
Eckerd Corp. (The)(a) 6,087 194,784
- -----------------------------------------------------------------------
Kroger Co. (The) (a) 35,300 1,641,450
- -----------------------------------------------------------------------
Revco D.S., Inc.(a) 32,400 1,198,800
- -----------------------------------------------------------------------
Rite Aid Corp. 25,480 1,012,830
- -----------------------------------------------------------------------
Safeway, Inc.(a) 71,000 3,035,250
- -----------------------------------------------------------------------
8,350,239
- -----------------------------------------------------------------------
RETAIL (STORES) - 9.19%
Bed Bath & Beyond, Inc.(a) 39,700 962,725
- -----------------------------------------------------------------------
Boise Cascade Office Products Corp.(a) 7,300 153,300
- -----------------------------------------------------------------------
CDW Computer Centers, Inc.(a) 18,700 1,109,144
- -----------------------------------------------------------------------
CompUSA, Inc.(a) 49,500 1,020,937
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES) - (CONTINUED)
Consolidated Stores Corp.(a) 67,250 $ 2,160,406
- -----------------------------------------------------------------------
Corporate Express, Inc.(a) 28,700 844,856
- -----------------------------------------------------------------------
Dayton Hudson Corp. 51,300 2,013,525
- -----------------------------------------------------------------------
Dollar General Corp. 27,762 888,384
- -----------------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 15,000 573,750
- -----------------------------------------------------------------------
Fila Holding S.p.A.-ADR (Italy) 9,100 528,938
- -----------------------------------------------------------------------
Finish Line, Inc. (The) - Class A(a) 24,200 511,225
- -----------------------------------------------------------------------
Gap, Inc. (The) 14,700 442,838
- -----------------------------------------------------------------------
Global DirectMail Corp.(a) 17,700 772,163
- -----------------------------------------------------------------------
Gymboree Corp.(a) 33,600 768,600
- -----------------------------------------------------------------------
Home Depot, Inc. 3,000 150,375
- -----------------------------------------------------------------------
Jones Apparel Group, Inc.(a) 25,000 934,375
- -----------------------------------------------------------------------
Kohl's Corp.(a) 20,900 820,325
- -----------------------------------------------------------------------
Lowe's Companies, Inc. 28,700 1,018,850
- -----------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 42,250 1,035,125
- -----------------------------------------------------------------------
Meyer (Fred), Inc.(a) 28,300 1,004,650
- -----------------------------------------------------------------------
Micro Warehouse, Inc.(a) 34,400 404,200
- -----------------------------------------------------------------------
Neiman Marcus Group, Inc. (The)(a) 9,000 229,500
- -----------------------------------------------------------------------
Oakley, Inc.(a) 57,800 628,575
- -----------------------------------------------------------------------
Pep Boys - Manny, Moe & Jack 27,400 842,550
- -----------------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 25,600 531,200
- -----------------------------------------------------------------------
PETSMART, Inc.(a) 57,300 1,253,438
- -----------------------------------------------------------------------
Ross Stores, Inc. 12,700 635,000
- -----------------------------------------------------------------------
Saks Holdings, Inc.(a) 8,200 221,400
- -----------------------------------------------------------------------
Sports Authority, Inc. (The)(a) 50,250 1,092,937
- -----------------------------------------------------------------------
Staples, Inc.(a) 129,425 2,337,739
- -----------------------------------------------------------------------
Sunglass Hut International, Inc.(a) 18,200 131,950
- -----------------------------------------------------------------------
Tech Data Corp.(a) 46,500 1,272,938
- -----------------------------------------------------------------------
Tiffany & Co. 21,500 787,437
- -----------------------------------------------------------------------
TJX Companies, Inc. 21,300 1,009,087
- -----------------------------------------------------------------------
Toys "R" Us, Inc.(a) 74,600 2,238,000
- -----------------------------------------------------------------------
Viking Office Products, Inc.(a) 82,700 2,207,056
- -----------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 13,000 472,875
- -----------------------------------------------------------------------
34,010,373
- -----------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS - 0.02%
Input/Output, Inc.(a) 4,500 83,250
- -----------------------------------------------------------------------
SEMICONDUCTORS - 3.15%
Advanced Micro Devices, Inc.(a) 39,800 1,024,850
- -----------------------------------------------------------------------
Altera Corp.(a) 26,300 1,911,681
- -----------------------------------------------------------------------
Applied Materials, Inc.(a) 25,000 898,438
- -----------------------------------------------------------------------
Intel Corp. 38,200 5,001,813
- -----------------------------------------------------------------------
KLA Instruments Corp.(a) 16,600 589,300
- -----------------------------------------------------------------------
National Semiconductor Corp.(a) 35,000 853,125
- -----------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
7
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SEMICONDUCTORS - (CONTINUED)
Novellus Systems, Inc.(a) 3,600 $ 195,075
- ------------------------------------------------------------------------------
SGS-Thomson Microelectronics N.V. - New York shares
(France)(a) 4,400 308,000
- ------------------------------------------------------------------------------
Solectron Corp.(a) 8,700 464,362
- ------------------------------------------------------------------------------
Tencor Instruments(a) 8,000 211,000
- ------------------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 4,000 182,000
- ------------------------------------------------------------------------------
11,639,644
- ------------------------------------------------------------------------------
SHOES & RELATED APPAREL - 1.08%
Nike, Inc. - Class B 28,000 1,673,000
- ------------------------------------------------------------------------------
Nine West Group, Inc.(a) 43,900 2,035,862
- ------------------------------------------------------------------------------
Wolverine World Wide, Inc. 9,900 287,100
- ------------------------------------------------------------------------------
3,995,962
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS - 5.45%
ACC Corp. 12,000 363,000
- ------------------------------------------------------------------------------
ADC Telecommunications, Inc.(a) 84,300 2,623,838
- ------------------------------------------------------------------------------
Andrew Corp.(a) 45,862 2,433,552
- ------------------------------------------------------------------------------
Aspect Telecommunications Corp.(a) 18,300 1,162,050
- ------------------------------------------------------------------------------
Billing Information Concepts(a) 14,700 422,625
- ------------------------------------------------------------------------------
Nokia Oy A.B. - Class A (Finland) 4,300 249,587
- ------------------------------------------------------------------------------
Nokia Oy A.B-ADR - Class A (Finland) 33,000 1,901,625
- ------------------------------------------------------------------------------
PairGain Technologies, Inc.(a) 95,800 2,915,913
- ------------------------------------------------------------------------------
PictureTel Corp.(a) 15,000 390,000
- ------------------------------------------------------------------------------
Premisys Communications, Inc.(a) 30,600 1,032,750
- ------------------------------------------------------------------------------
QUALCOMM, Inc.(a) 16,600 661,925
- ------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Sweden) 90,320 2,726,535
- ------------------------------------------------------------------------------
Tellabs, Inc.(a) 45,200 1,700,650
- ------------------------------------------------------------------------------
U.S. Long Distance Corp.(a) 9,300 74,400
- ------------------------------------------------------------------------------
Western Wireless Corp. - Class A(a) 26,000 360,750
- ------------------------------------------------------------------------------
WorldCom, Inc.(a) 43,800 1,141,537
- ------------------------------------------------------------------------------
20,160,737
- ------------------------------------------------------------------------------
TELEPHONE - 0.25%
Cincinnati Bell, Inc. 15,000 924,375
- ------------------------------------------------------------------------------
TEXTILES - 1.91%
Designer Holdings Ltd.(a) 7,100 114,488
- ------------------------------------------------------------------------------
Gucci Group N.V.-ADR (Netherlands) 14,800 945,350
- ------------------------------------------------------------------------------
Liz Claiborne, Inc. 35,700 1,378,912
- ------------------------------------------------------------------------------
Nautica Enterprises, Inc.(a) 41,300 1,042,825
- ------------------------------------------------------------------------------
Russel Corp. 26,300 782,425
- ------------------------------------------------------------------------------
Tommy Hilfiger Corp.(a) 38,700 1,857,600
- ------------------------------------------------------------------------------
Unifi, Inc. 29,500 947,687
- ------------------------------------------------------------------------------
7,069,287
- ------------------------------------------------------------------------------
TRANSPORTATION - 0.18%
AirNet Systems, Inc.(a) 20,000 295,000
- ------------------------------------------------------------------------------
Rural/Metro Corp.(a) 10,000 360,000
- ------------------------------------------------------------------------------
655,000
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TRUCKING - 0.12%
U.S. Freightways Corp. 15,900 $ 436,256
- -------------------------------------------------------------------------------
Total Common Stocks 324,666,547
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE BONDS - 0.06%
FINANCE (CONSUMER CREDIT) - 0.06%
Cityscape Financial Corp., Conv. Sub. Deb., 6.00%,
05/01/06 $ 225,000 228,938
- -------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 5.27%
U.S. TREASURY BILLS(b)
5.22%, 01/02/97 5,505,000(c) 5,504,244
- -------------------------------------------------------------------------------
4.64%, 02/06/97 1,250,000 1,244,325
- -------------------------------------------------------------------------------
5.03%, 03/27/97 12,900,000(c) 12,753,714
- -------------------------------------------------------------------------------
Total U.S. Treasury Securities 19,502,283
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 7.27%(d)
Daiwa Securities America Inc., 6.25%, 01/02/97(e) 26,887,387 26,887,387
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 100.33% 371,285,155
- -------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.33%) (1,221,990)
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $370,063,165
===============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(c) A portion of the principal amount was pledged as collateral for open
futures contracts at 12/31/96. See Note 6 to Financial Statements.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Abbreviations:
ADR - American Depository Receipt
Conv.- Convertible
Deb. - Debentures
Sub. - Subordinated
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $295,718,658) $371,285,155
- ----------------------------------------------------------------------
Receivables for:
Investments sold 737,799
- ----------------------------------------------------------------------
Capital stock sold 281,951
- ----------------------------------------------------------------------
Dividends and interest 69,820
- ----------------------------------------------------------------------
Investment for deferred compensation plan 12,698
- ----------------------------------------------------------------------
Organizational costs, net 3,857
- ----------------------------------------------------------------------
Other assets 894
- ----------------------------------------------------------------------
Total assets 372,392,174
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,506,462
- ----------------------------------------------------------------------
Capital stock reacquired 178,464
- ----------------------------------------------------------------------
Variation margin 386,900
- ----------------------------------------------------------------------
Deferred compensation plan 12,698
- ----------------------------------------------------------------------
Accrued advisory fees 198,353
- ----------------------------------------------------------------------
Accrued directors' fees 1,785
- ----------------------------------------------------------------------
Accrued administrative services fees 4,631
- ----------------------------------------------------------------------
Accrued operating expenses 39,716
- ----------------------------------------------------------------------
Total liabilities 2,329,009
- ----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $370,063,165
======================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 19,043,829
======================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 19.43
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $6,874 foreign withholding tax) $ 617,154
- ------------------------------------------------------------------------
Interest 2,033,202
- ------------------------------------------------------------------------
Total investment income 2,650,356
- ------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,884,838
- ------------------------------------------------------------------------
Custodian fees 112,537
- ------------------------------------------------------------------------
Administrative services fees 46,623
- ------------------------------------------------------------------------
Directors' fees and expenses 7,498
- ------------------------------------------------------------------------
Organizational costs 2,892
- ------------------------------------------------------------------------
Other 74,463
- ------------------------------------------------------------------------
Total expenses 2,128,851
- ------------------------------------------------------------------------
Net investment income 521,505
- ------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND
FUTURES CONTRACTS:
NET REALIZED GAIN FROM:
Investment securities 4,609,186
- ------------------------------------------------------------------------
Futures contracts 2,349,285
- ------------------------------------------------------------------------
6,958,471
- ------------------------------------------------------------------------
UNREALIZED APPRECIATION OF:
Investment securities 36,218,687
- ------------------------------------------------------------------------
Futures contracts 392,348
- ------------------------------------------------------------------------
36,611,035
- ------------------------------------------------------------------------
Net gain on investment securities and futures contracts 43,569,506
- ------------------------------------------------------------------------
Net increase in net assets resulting from operations $44,091,011
========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 521,505 $ 532,603
- ------------------------------------------------------------------------------
Net realized gain from investment securities and
futures contracts 6,958,471 3,521,243
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities and futures contracts 36,611,035 33,203,988
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 44,091,011 37,257,834
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (546,109) (45,369)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 114,365,840 86,762,686
- ------------------------------------------------------------------------------
Net increase in net assets 157,910,742 123,975,151
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 212,152,423 88,177,272
- ------------------------------------------------------------------------------
End of period $370,063,165 $212,152,423
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $287,275,923 $172,910,083
- ------------------------------------------------------------------------------
Undistributed net investment income 491,407 516,011
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and futures contracts 6,467,448 (491,023)
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities
and futures contracts 75,828,387 39,217,352
- ------------------------------------------------------------------------------
$370,063,165 $212,152,423
==============================================================================
</TABLE>
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Capital Appreciation Fund (the "Fund"). The Fund's investment
objective is to seek capital appreciation through investments in common
stocks, with emphasis on medium-sized and smaller emerging growth companies.
Currently, shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable annuity contracts and variable life
insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
The following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements.
A. Security Valuations - Equity securities, including warrants, that are
traded on a national securities exchange or NASDAQ National Market System
are valued at the last reported sales price or, in the case of over-the-
counter securities or if there has been no sale that day, at the mean
between the closing bid and asked prices on that day. Securities traded in
the over-the-counter market, except (i) securities for which representative
exchange prices are available, and (ii) securities reported in the NASDAQ
National Market System, are valued at the mean between representative last
bid and asked prices obtained from an electronic quotation reporting
system, if such prices are available, or from established market makers.
Debt obligations that are issued or guaranteed by the U.S. Treasury are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Short-term investments
with remaining maturities of up to and including 60 days are valued at
amortized cost which approximates market value. Short-term securities that
mature in more than 60 days are valued at current market quotations.
Securities for which market quotations are either not readily available or
are questionable are valued at fair value as determined in good faith by,
or under the authority of, the Board of Directors.
AIM V.I. CAPITAL APPRECIATION FUND
10
<PAGE>
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Organizational Costs - Organizational costs for the Fund of $14,461 are
being amortized over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1996, AIM was reimbursed $46,623 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1996, the Fund incurred legal fees of
$3,382 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31 ,
1996 was $255,239,342 and $151,685,013, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $84,767,082
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (9,348,830)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $75,418,252
==========================================================================
</TABLE>
Cost of investments for tax purposes is $295,866,903.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold 7,080,357 $129,652,839 6,155,688 $96,675,587
- ---------------------------------------------------------------------------
Issued as reinvestment of
distributions 28,864 546,109 2,823 45,369
- ---------------------------------------------------------------------------
Reacquired (887,800) (15,833,108) (654,458) (9,958,270)
- ---------------------------------------------------------------------------
6,221,421 $114,365,840 5,504,053 $86,762,686
===========================================================================
</TABLE>
NOTE 6 - OPEN FUTURES CONTRACTS
On December 31, 1996, $853,000 principal amount of U.S. Treasury bills were
pledged as collateral to cover margin requirements for open futures contracts:
Open futures contracts at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
NO. OF UNREALIZED
CONTRACT CONTRACTS MONTH COMMITMENT APPRECIATION
<S> <C> <C> <C> <C>
S&P 500 Index 53 contracts Mar 97 Buy $261,890
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
11
<PAGE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, the eleven months ended December 31,
1995, the year ended January 31, 1995 and the period May 5, 1993 (date
operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
--------------------- -----------------
1996 1995 1995 1994
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 16.55 $ 12.05 $ 12.58 $ 10.00
- -------------------------------- -------- -------- ------- -------
Income from investment
operations:
Net investment income 0.02 0.04 0.05 --
- -------------------------------- -------- -------- ------- -------
Net gains (losses) on
securities (both realized and
unrealized) 2.89 4.46 (0.54) 2.59
- -------------------------------- -------- -------- ------- -------
Total from investment
operations 2.91 4.50 (0.49) 2.59
- -------------------------------- -------- -------- ------- -------
Less distributions:
Dividends from net investment
income (0.03) -- (0.04) (0.01)
- -------------------------------- -------- -------- ------- -------
Net asset value, end of period $ 19.43 $ 16.55 $ 12.05 $ 12.58
================================ ======== ======== ======= =======
Total return(a) 17.58% 37.38% (3.91)% 25.90%
================================ ======== ======== ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s
omitted) $370,063 $212,152 $88,177 $35,354
================================ ======== ======== ======= =======
Ratio of expenses to average net
assets 0.73%(b) 0.75%(c) 0.84% 1.06%(c)
================================ ======== ======== ======= =======
Ratio of net investment income
to average net assets 0.18%(b) 0.39%(c) 0.46% 0.07%(c)
================================ ======== ======== ======= =======
Portfolio turnover rate 59% 37% 81% 34%
================================ ======== ======== ======= =======
Average broker commission
rate(d) $ 0.0592 N/A N/A N/A
================================ ======== ======== ======= =======
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $293,306,287.
(c) Annualized.
(d) Disclosure requirement beginning with the Fund's fiscal year ended
December 31, 1996.
NOTE 8 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. CAPITAL APPRECIATION FUND
12
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Capital Appreciation Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1996, the related statement of operations for the year then ended,
the statement of changes in net assets for the year then ended and the eleven
month period ended December 31, 1995 and the financial highlights for the year
then ended, the eleven month period ended December 31, 1995, the year ended
January 31, 1995 , and the period May 5, 1993 (commencement of operations)
through January 31, 1994. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. Where
brokers did not reply to our confirmation requests, we carried out other
appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Capital Appreciation Fund, as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and the eleven month period ended December 31, 1995 and the
financial highlights for the year then ended, the eleven month period ended
December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993
(commencement of operations) through January 31, 1994, in conformity with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. CAPITAL APPRECIATION FUND
13
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
FUND'S DIVERSIFIED APPROACH MEETS
THE CHALLENGE OF TURBULENT BOND MARKET
A roundtable discussion with the Fund management team for
AIM V.I. Diversified Income Fund for the fiscal year ended December 31, 1996.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID THE FUND PERFORM the factors that influence them vary. rate debt, second only to 1993's record
DURING THE REPORTING PERIOD ? Holding all three types of bonds $416 billion according to The Wall
A. Uncertain economic conditions and diversifies the investment risk Street Journal. In 1996, $78 billion
ongoing inflation concerns created associated with any one class, and that of new issues were high-yielded securi-
dramatic volatility that tested financial may lower the Fund's volatility and enhance ties.
markets in 1996, particularly for fixed- its return potential. The significant yield advantage of
income investors. Thanks to its diversified At the end of the reporting period, high yield issues, healthy cash flow
approach, the Fund managed to outper- investment-grade bonds and cash com- growth, and substantial investor de-
form the overall returns for most bond prised 42% of the portfolio, followed by mand, made the high-yield sector a top
asset classes-its total return was 10.19% 36% in foreign bonds with the balance performer in 1996.
compared to 3.29% for the Lehman in high-yield bonds.
Aggregate Bond Index and 7.95% for the Q. HOW DID FOREIGN BONDS PERFORM DURING
Lipper General Bond Fund Index. Q. WHAT FACTORS AFFECTED THE PER- THE PERIOD?
FORMANCE OF FIXED-INCOME MARKETS A. Most foreign bond markets performed
Q. HOW DID YOU MANAGE THE FUND DURING 1996? well for the year, particularly in
DURING THE PERIOD? A. It was a year of mixed signals Europe. Clearly, the drive to comply
A. We use a "three-=legged stool" approach for fixed-income markets. Investors with European Monetary Union (EMU)
to investing, holding securities in three in investment-grade bonds were con- standards has been a significant in-
bond-market segments: high-yield bonds, cerned about the direction of the fluence behind the economic environ-
foreign bonds, and investment-grade domestic economy. ment in Europe. Many countries are
bonds. These three classes of debt securi- Indications of surprisingly attacking budget deficits and em-
ties tend to perform differently because strong economic growth in the U.S. bracing policies designed to lower
early in the year sent most domestic inflation and debt in a scramble to
bond prices tumbling the first half qualify for EMU. AS a result, many
of 1996. Investment-grade domestic European bond markets performed well
Top 5 Holdings bonds began to recover in the fall over the course of 1996.
As of 12/31/96 when it became apparent that economic The Fund was invested in many of
growth was moderate and without inflation. the better-performing markets including
1. U.S. Treasury Note 6.5% 05/2001 Italy, the United Kingdom, and Sweden.
2. LKB-Global 6.00% 01/2006 Q. HOW WERE HIGH-YIELD SECURITIES Outside Europe, the Fund also partic-
3. KFW International Finance AFFECTED? ipated in top-performing markets like
11.625% 11/1998 A. The perspective was quite different Australia, New Zealand, and Canada.
4. Kingdom of Denmark 8.00% 11/2001 for high-yield securities. Investors in
5. Swedish Government 10.25% 05/2003 high-yield bonds welcome a lively economy. Q. HOW DID INVESTMENT-GRADE DOMESTIC
Healthy economic growth tends to improve BONDS REACT TO ECONOMIC UNCERTAINTY
Please keep in mind that the Fund's the earnings capacity of the bond-issuing IN THE U.S.?
portfolio composition is subject to companies and ease credit concerns for A. During the first quarter of 1996,
change and there is no assurance lower-quality debt-issuers. the perception that the economy was
the Fund will continue to hold any Corporate treasurers, who also relish growing faster than its long-term
particular security. healthy economic growth and low interest potential led investors to believe
rates, issued nearly $405 billion in corpo- that the Federal Reserve Board would
raise short-term interest rates to curb
inflation. In turn, yields on domestic
investment-grade bonds increased,
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
taking bond prices down. Bond prices Q. HOW WAS THE FUND POSITIONED AT Q. WHAT IS YOUR MARKET OUTLOOK?
began to recover in the fall when it THE END OF THE REPORTING PERIOD? A. The Fund's diversified style of
became apparent that economic growth A. There were 150 holdings in the investing will continue to moderate
was moderate, without rising Fund as of December 31, 1996. volatility and enhance total return
inflation. Weighted average maturity for the opportunities. The U.S. economy is
Reflecting these changing expecta- Fund, which is an average of the growing at a reasonable rate without
tions, the yield on the 10-year U.S. term of maturity remaining on each rising inflation, and that reduces
Treasury note ranged from a low of of the Fund's bond holdings, was the likelihood that interest rates
5.5% in January to a high of 7.1% in approximately nine years. Duration, may increase over the near term.
June, before closing at 6.4% for the which is the average time it takes In recent testimony before Congress,
year. to receive the interest and the Fed Chairman Alan Greenspan said,
The advance and then decline in principal on a bond, was about six "The economy has retained
market yields over the course of years. considerable vigor, with few signs
1996 led one market strategist to dub The Fund had an average portfolio of the imbalances and inflationary
it "a round-trip year." Despite the quality rating of "A" as measured by tensions that have disrupted past
fluctuations experienced in the Standard & Poor's Corporation (S&P) expansions."
domestic investment-grade market and Moody's Investor Service (Moody's), Less interest rate volatility
in 1996, the Fund's diversified two widely known credit rating means less risk. If the current
approach moderated this volatility agencies, and other nationally positive environment can be
while providing enhanced total recognized securities rating sustained, the results should be
return. organizations. These ratings are favorable for all investors. If
historical and are based on analysis economic performance deviates
of the credit quality of the substantially from current
individual securities in the Fund's expectations, the Fund's diversi-
portfolio, composition, and fied approach to investing should
management. perform well even under more
volatile conditions.
Growth of a $10,000 Investment
From 5/5/93 - 12/31/96
AIM V.I. Diversified Lehman Brothers
Income Fund Aggregate Bond Index
(In thousands)
<S> <C> <C>
5/5/93 $10,000 $10,000
7/30/93 9,980 10,252
10/29/93 10,240 10,499
1/31/94 10,622 10,607
4/29/94 10,833 10,084
7/29/94 10,165 10,261
10/31/94 10,276 10,113
1/31/95 10,230 10,361
4/28/95 10,146 10,822
7/31/95 10,795 11,298
10/31/95 11,281 11,696
1/31/96 11,733 12,117
4/30/96 12,054 11,756
7/31/96 12,258 11,922
10/31/96 12,881 12,378
12/31/96 13,204 12,472
Past performance cannot guarantee
comparable future results.
AVERAGE ANNUAL TOTAL RETURN
As of 12/31/96
1 Year 10.19%
Inception (5/5/93) 7.89
The performance figures shown represent the AIM V.I. Diversified Income Fund
and are not intended to reflect actual annuity values, and do not reflect
charges at the separate account level which, if applied, would lower the
performance results. The Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in the net asset value. The
Fund's investment return and principal value will fluctuate so that Fund shares,
when redeemed, may be worth more or less than their original cost. Source:
Towers Data Systems HYPO--Registered Trademark--.
The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
considered representative of treasury, agency, corporate, and mortgage-backed
debt securities. Results shown are for the period 4/30/93 through 12/31/96.
Source: Lehman Brothers.
An investment cannot be made in any index listed. Index results include
reinvestment dividends.
</TABLE>
---------------
If the current
positive environment
can be sustained,
the results should be favorable
for all investors.
---------------
AIM V.I. DIVERSIFIED INCOME FUND
15
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS &
NOTES - 45.28%
ADVERTISING/BROADCASTING - 2.87%
Katz Media Corp., Sr. Sub. Notes, 10.50%, 01/15/07
(acquired 12/13/96; cost $60,000)(b) $ 60,000 $ 61,575
- -----------------------------------------------------------------------------
Time Warner, Inc.
Deb., 6.85%, 01/15/26 500,000 491,595
- -----------------------------------------------------------------------------
Notes, 8.18%, 08/15/07 750,000 781,950
- -----------------------------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75%, 06/01/05 500,000 491,000
- -----------------------------------------------------------------------------
1,826,120
- -----------------------------------------------------------------------------
AIRLINES - 0.66%
Airplanes Pass Through Trust, Sub. Bonds, 10.875%,
03/15/19 300,000 333,189
- -----------------------------------------------------------------------------
Greenwich Air Services, Inc., Sr. Notes, 10.50%,
06/01/06 80,000 86,000
- -----------------------------------------------------------------------------
419,189
- -----------------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS) - 0.73%
General Motors Corp., Deb., 8.80%, 03/01/21 400,000 462,572
- -----------------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES - 0.34%
Blue Bird Body Co., Sr. Sub. Notes, 10.75%, 11/15/06
(acquired 11/13/96-11/20/96;
cost $111,964)(b) 110,000 115,225
- -----------------------------------------------------------------------------
CSK Auto Inc., Sr. Sub. Notes, 11.00%, 11/01/06
(acquired 10/23/96; cost $100,000)(b) 100,000 103,875
- -----------------------------------------------------------------------------
219,100
- -----------------------------------------------------------------------------
BANKING - 4.48%
Bankers Trust New York Corp., Gtd. Notes, 7.75%,
12/01/26 (acquired 11/22/96; cost $586,554)(b) 600,000 576,849
- -----------------------------------------------------------------------------
Deutsche Bank Financial, Gtd. Notes, 6.70%, 12/13/06 750,000 737,055
- -----------------------------------------------------------------------------
First Union Bancorp, Sub. Deb., 7.50%, 04/15/35 800,000 843,352
- -----------------------------------------------------------------------------
Mercantile Bank, Sub. Notes, 6.375%, 01/15/04 300,000 289,794
- -----------------------------------------------------------------------------
Sovereign Bancorp, Inc., Sub. Notes, 8.00%, 03/15/03 400,000 408,240
- -----------------------------------------------------------------------------
2,855,290
- -----------------------------------------------------------------------------
BEVERAGES (SOFT DRINKS) - 1.53%
Coca-Cola Enterprises, Inc., Putable Notes, 7.24%,
06/20/20(c) 5,000,000 973,350
- -----------------------------------------------------------------------------
CABLE TELEVISION - 2.31%
Fundy Cable Ltd., Sr. Yankee Sec. Second Priority
Notes, 11.00%, 11/15/05 60,000 63,750
- -----------------------------------------------------------------------------
Heartland Wireless Communications Inc., Sr. Notes,
14.00%, 10/15/04 (acquired 12/17/96; cost
$120,000)(b) 120,000 124,800
- -----------------------------------------------------------------------------
Marcus Cable Operating Co., Sr. Disc. Notes, 13.50%,
08/01/04(d) 700,000 575,750
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
CABLE TELEVISION - (CONTINUED)
Rifkin Acquisition Partners L.L.P., Sr. Sub. Notes,
11.125%, 01/15/06 $ 100,000 $ 104,000
- -------------------------------------------------------------------------------
TeleWest Communications PLC, Sr. Yankee Disc. Deb.,
11.00%, 10/01/07(d) 170,000 118,363
- -------------------------------------------------------------------------------
United International Holdings, Inc., Sr. Disc. Notes,
12.78%, 11/15/99(c) 400,000 288,500
- -------------------------------------------------------------------------------
Wireless One, Inc., Sr. Notes, 13.00%, 10/15/03 200,000 196,000
- -------------------------------------------------------------------------------
1,471,163
- -------------------------------------------------------------------------------
CHEMICALS - 1.15%
Crain Industries, Inc., Sr. Sub. Notes, 13.50%,
08/15/05 180,000 203,850
- -------------------------------------------------------------------------------
LaRoche Industries, Inc., Sr. Sub. Notes, 13.00%,
08/15/04 100,000 108,000
- -------------------------------------------------------------------------------
PrintPack Inc., Sr. Sub. Notes, 10.625%, 08/15/06
(acquired 08/15/96-09/04/96; cost $160,875)(b) 160,000 166,400
- -------------------------------------------------------------------------------
Sterling Chemicals, Inc., Sr. Sub. Notes, 11.75%,
08/15/06 100,000 106,000
- -------------------------------------------------------------------------------
Tri Polyta Finance B.V., Yankee Sec. Gtd. Notes,
11.375%, 12/01/03 140,000 146,300
- -------------------------------------------------------------------------------
730,550
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES - 0.23%
Hines Horticulture, Inc., Sr. Sub. Notes, 11.75%,
10/15/05 140,000 149,100
- -------------------------------------------------------------------------------
CONTAINERS - 0.84%
Ivex Packaging Corp., Sr. Sub. Notes, 12.50%, 12/15/02 390,000 425,100
- -------------------------------------------------------------------------------
Owens-Illinois, Inc., Sr. Sub. Notes, 10.50%, 06/15/02 100,000 106,250
- -------------------------------------------------------------------------------
531,350
- -------------------------------------------------------------------------------
ELECTRIC POWER - 0.89%
AES China Generating Co., Sr. Yankee Notes, 10.125%,
12/15/06 40,000 41,700
- -------------------------------------------------------------------------------
El Paso Electric Co., First Mortgage Bonds, 8.90%,
02/01/06 500,000 522,265
- -------------------------------------------------------------------------------
563,965
- -------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 4.16%
Associates Corp. of North America, Deb., 7.95%,
02/15/10 750,000 809,107
- -------------------------------------------------------------------------------
GMAC, Notes, 9.00%, 10/15/02 750,000 825,758
- -------------------------------------------------------------------------------
Household Finance Corp., Notes, 7.125%, 09/01/05 1,000,000 1,011,050
- -------------------------------------------------------------------------------
2,645,915
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
16
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
FINANCE (LEASING COMPANIES) - 0.69%
Sea Containers, Ltd., Series B Sr. Yankee Sub. Deb.,
12.50%, 12/01/04 $ 400,000 $ 442,000
- ------------------------------------------------------------------------------
FOOD/PROCESSING - 0.23%
International Home Foods Inc., Sr. Sub. Notes,
10.375%, 11/01/06 (acquired 10/29/96; cost
$80,000)(b) 80,000 83,600
- ------------------------------------------------------------------------------
Pilgrim's Pride Corp., Sr. Sub. Notes, 10.875%,
08/01/03 60,000 60,075
- ------------------------------------------------------------------------------
143,675
- ------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES - 1.15%
Province Of Manitoba, Yankee Bonds, 7.75%, 07/17/16 700,000 731,927
- ------------------------------------------------------------------------------
FURNITURE - 0.50%
Simmons Co., Sr. Sub. Notes, 10.75%, 04/15/06 300,000 317,250
- ------------------------------------------------------------------------------
GAMING - 0.78%
Coast Hotels & Casinos Inc., Series B Sec. First Mtg.
Gtd. Notes, 13.00%, 12/15/02 180,000 199,350
- ------------------------------------------------------------------------------
Trump Atlantic City Associates, Secured First Mtg.
Gtd. Notes, 11.25%, 05/01/06 300,000 298,500
- ------------------------------------------------------------------------------
497,850
- ------------------------------------------------------------------------------
GAS DISTRIBUTION - 0.84%
Ferrellgas Partners, Sr. Notes, 9.375%, 06/15/06 525,000 536,156
- ------------------------------------------------------------------------------
HOTELS/MOTELS - 2.02%
ITT Corp., Gtd. Deb., 7.375%, 11/15/15 750,000 720,855
- ------------------------------------------------------------------------------
John Q. Hammons Hotels Inc., Gtd. First Mtg. Notes,
9.75%, 10/01/05 550,000 562,375
- ------------------------------------------------------------------------------
1,283,230
- ------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.12%
Americo Life Inc., Sr. Sub. Notes, 9.25%, 06/01/05 75,000 75,000
- ------------------------------------------------------------------------------
LEISURE & RECREATION - 0.27%
Icon Health & Fitness, Sr. Sub. Notes, 13.00%,
07/15/02 150,000 170,437
- ------------------------------------------------------------------------------
MACHINERY (HEAVY) - 0.47%
Fairfield Manufacturing Co., Inc., Sr. Sub. Notes,
11.375%, 07/01/01 100,000 105,000
- ------------------------------------------------------------------------------
PrimeCo. Inc., Sr. Sub. Notes, 12.75%, 03/01/05 167,000 191,215
- ------------------------------------------------------------------------------
296,215
- ------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 1.02%
AM General Corp., Sr. Notes, 12.875%, 05/01/02 130,000 124,312
- ------------------------------------------------------------------------------
Interlake Corp., Sr. Notes, 12.00%, 11/15/01 200,000 215,250
- ------------------------------------------------------------------------------
MVE Inc., Sr. Notes, 12.50%, 02/15/02 190,000 202,588
- ------------------------------------------------------------------------------
Spinnaker Industries Inc., Sr. Sec. Notes, 10.75%,
10/15/06 (acquired 10/18/96; cost $100,000)(b) 100,000 104,250
- ------------------------------------------------------------------------------
646,400
- ------------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS - 0.85%
Dade International Inc., Series B Sr. Sub. Notes,
11.125%, 05/01/06 80,000 87,000
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
MEDICAL INSTRUMENTS/PRODUCTS - (CONTINUED)
Dynacare Inc., Yankee Sr. Notes, 10.75%, 01/15/06 $ 170,000 $ 172,550
- -------------------------------------------------------------------------------
Graphic Controls Corp., Series A Sr. Sub. Notes,
12.00%, 09/15/05 150,000 166,875
- -------------------------------------------------------------------------------
IMED Corp., Sr. Sub. Notes, 9.75%, 12/01/06 (acquired
11/19/96; cost $110,000)(b) 110,000 112,338
- -------------------------------------------------------------------------------
538,763
- -------------------------------------------------------------------------------
METALS - 0.56%
Rio Algom Ltd., Yankee Deb., 7.05%, 11/01/05 370,000 359,736
- -------------------------------------------------------------------------------
NATURAL GAS PIPELINE - 0.70%
Enron Corp., Sr. Sub. Deb., 6.75%, 07/01/05 450,000 445,554
- -------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 1.33%
Abraxas Petroleum Corp., Sr. Notes, 11.50%, 11/01/04
(acquired 11/05/96-12/03/96; cost $160,900)(b) 160,000 171,600
- -------------------------------------------------------------------------------
Mariner Energy Corp., Sr. Sub. Notes, 10.50%, 08/01/06
(acquired 08/12/96-09/04/96: cost $170,538)(b) 170,000 181,050
- -------------------------------------------------------------------------------
Talisman Energy, Inc., Yankee Deb., 7.125%, 06/01/07 500,000 492,460
- -------------------------------------------------------------------------------
845,110
- -------------------------------------------------------------------------------
OIL & GAS (INTEGRATED) - 0.13%
Wainoco Oil Corp., Sr. Notes, 12.00%, 08/01/02 80,000 82,400
- -------------------------------------------------------------------------------
OIL & GAS (SERVICES) - 0.10%
Falcon Drilling Co., Inc., Series B Sr. Notes, 9.75%,
01/15/01 60,000 63,150
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 1.20%
RAPP International Finance, Gtd. Yankee Sec. Notes,
11.50%, 12/15/00 150,000 159,375
- -------------------------------------------------------------------------------
Repap New Brunswick, Sr. Yankee Second Priority Sec.
Notes, 10.625%, 04/15/05 170,000 178,500
- -------------------------------------------------------------------------------
Riverwood International Corp., Sr. Gtd. Sub. Notes,
10.875%, 04/01/08 210,000 195,300
- -------------------------------------------------------------------------------
Uniforet Inc., Sr. Yankee Gtd. Notes, 11.125%,
10/15/06 (acquired 10/07/96-12/18/96; cost
$114,550)(b) 115,000 107,525
- -------------------------------------------------------------------------------
United Stationer Supply, Sr. Sub. Notes, 12.75%,
05/01/05 110,000 122,650
- -------------------------------------------------------------------------------
763,350
- -------------------------------------------------------------------------------
POLLUTION CONTROL - 1.38%
WMX Technologies, Inc., Notes, 7.10%, 08/01/26 850,000 878,492
- -------------------------------------------------------------------------------
PUBLISHING - 1.46%
MDC Communications Corp., Sr. Sub. Yankee Notes,
10.50%, 12/01/06 80,000 82,700
- -------------------------------------------------------------------------------
News America Holdings, Inc., Sr. Gtd. Deb., 9.25%,
02/01/13 750,000 843,337
- -------------------------------------------------------------------------------
926,037
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
17
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
RAILROADS - 0.28%
Johnstown America Industries, Inc., Sr. Sub. Notes,
11.75%, 08/15/05 $ 185,000 $ 178,525
- -------------------------------------------------------------------------------
REAL ESTATE - 1.20%
Finova Capital Corp., Notes, 7.40%, 05/06/06 750,000 765,428
- -------------------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 0.80%
Great Atlantic & Pacific Tea Co., Inc., Yankee Notes,
7.78%, 11/01/00
(acquired 10/18/95; cost $500,000)(b) 500,000 509,622
- -------------------------------------------------------------------------------
RETAIL (STORES) - 1.06%
Loehmann's Holdings, Inc., Sr. Notes, 11.875%,
05/15/03 200,000 217,500
- -------------------------------------------------------------------------------
Samsonite Corp., Sr. Sub. Notes, 11.125%, 07/15/05 150,000 169,687
- -------------------------------------------------------------------------------
Specialty Retailers Inc., Sr. Sub. Notes, 11.00%,
08/15/03 275,000 290,125
- -------------------------------------------------------------------------------
677,312
- -------------------------------------------------------------------------------
SCHOOLS - 0.27%
Herff Jones Inc., Sr. Sub. Notes, 11.00%, 08/15/05 50,000 54,063
- -------------------------------------------------------------------------------
Scholastic Brands Inc., Sr. Sub. Notes, 11.00%,
01/15/07
(acquired 12/10/96-12/12/96; cost $115,844)(b) 115,000 117,587
- -------------------------------------------------------------------------------
171,650
- -------------------------------------------------------------------------------
SEMICONDUCTORS - 0.29%
Advanced Micro Devices, Inc., Sr. Notes, 11.00%,
08/01/03 170,000 185,300
- -------------------------------------------------------------------------------
STEEL - 0.65%
Gulf States Steel Corp., First Mtg. Notes, 13.50%,
04/15/03 230,000 219,650
- -------------------------------------------------------------------------------
GS Industries, Inc., Sr. Notes, 12.00%, 09/01/04 185,000 193,094
- -------------------------------------------------------------------------------
412,744
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.49%
Arch Communications Group, Inc., Sr. Disc. Notes,
10.875%, 03/15/08(d) 200,000 115,500
- -------------------------------------------------------------------------------
Bell Canada, Yankee Deb., 9.50%, 10/15/10 350,000 422,219
- -------------------------------------------------------------------------------
Clearnet Communications Inc., Sr. Yankee Disc. Notes,
14.75%, 12/15/05(d) 270,000 169,088
- -------------------------------------------------------------------------------
Colt Telecom Group PLC, Sr. Yankee Disc. Notes,
12.00%, 12/15/06(d) 180,000 107,325
- -------------------------------------------------------------------------------
Northern Telecom, Yankee Notes, 6.00%, 09/01/03 100,000 96,090
- -------------------------------------------------------------------------------
Omnipoint Corp., Series A Sr. Notes, 11.625%, 08/15/06
(acquired 11/21/96; cost $208,955)(b) 200,000 209,500
- -------------------------------------------------------------------------------
Paging Network, Inc., Sr. Sub. Notes, 10.00%, 10/15/08
(acquired 10/10/96-10/29/96; cost $99,700)(b) 100,000 101,625
- -------------------------------------------------------------------------------
PriCellular Wireless Corp., Sr. Notes, 10.75%,
11/01/04 (acquired 10/30/96; cost $70,000)(b) 70,000 73,238
- -------------------------------------------------------------------------------
Sygnet Wireless Inc., Sr. Notes, 11.50%, 10/01/06 90,000 93,375
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
TELECOMMUNICATIONS - (CONTINUED)
TCI Communications Inc., Sr. Notes, 8.00%, 08/01/05 $ 850,000 $ 833,374
- -------------------------------------------------------------------------------
2,221,334
- -------------------------------------------------------------------------------
TELEPHONE - 0.19%
PhoneTel Technologies, Inc., Sr. Notes, 12.00%,
12/15/06 120,000 124,500
- -------------------------------------------------------------------------------
TRANSPORTATION - 0.58%
Stena A.B., Yankee Sr. Notes, 10.50%, 12/15/05 230,000 249,550
- -------------------------------------------------------------------------------
Transportacion Maritima Mexicana S.A. de CV, Yankee
Sr. Notes, 10.00%, 11/15/06 120,000 121,800
- -------------------------------------------------------------------------------
371,350
- -------------------------------------------------------------------------------
TRUCKING - 0.48%
AmeriTruck Distribution Corp., Sr. Sub. Notes,
12.25%, 11/15/05 300,000 303,000
- -------------------------------------------------------------------------------
Total U.S. Dollar Denominated Non-Convertible
Bonds & Notes 28,811,161
- -------------------------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES - 1.51%
AIRLINES - 0.88%
Continental Airlines, Inc., Conv. Sub. Notes,
6.75%, 04/15/06 (acquired 02/27/96; cost
$499,825)(b) 500,000 561,065
- -------------------------------------------------------------------------------
TRANSPORTATION - 0.63%
Laidlaw, Inc., Yankee Conv. Deb., 6.00%, 01/15/99
(acquired 08/19/96; cost $397,500)(b) 300,000 400,500
- -------------------------------------------------------------------------------
Total U.S. Dollar Denominated Convertible Bonds &
Notes 961,565
- -------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED NON-
CONVERTIBLE BONDS & NOTES(e) - 12.06%
CANADA - 5.81%
Bank of Montreal (Banking), Sub. Deb., 7.92%,
07/31/02 CAD 850,000 676,313
- -------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas - Services),
Deb., 11.00%, 10/31/00 450,000 385,160
- -------------------------------------------------------------------------------
NAV Canada (Transportation), Bonds, 7.40%, 06/01/27 1,000,000 724,312
- -------------------------------------------------------------------------------
Rogers Cablesystems (Cable Television), Sr. Sec.
Second Priority Deb., 9.65%, 01/15/14 250,000 175,272
- -------------------------------------------------------------------------------
Teleglobe Canada Inc. (Telecommunications), Deb.,
8.35%, 06/20/03 850,000 685,127
- -------------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas - Services)
Notes, 8.55%, 02/01/06 280,000 229,165
- -------------------------------------------------------------------------------
Series Q Deb., 10.625%, 10/20/09 500,000 468,378
- -------------------------------------------------------------------------------
Westcoast Energy Inc. (Electric Power), Deb.,
6.45%, 12/18/06 (acquired 12/03/96; cost
$369,585)(b) 500,000 356,167
- -------------------------------------------------------------------------------
3,699,894
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
18
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
GERMANY - 3.88%
International Bank for Reconstruction &
Development (Supranational Organization),
Unsub. Global Bonds, 7.125%, 04/12/05 DEM 725,000 $ 511,135
- -------------------------------------------------------------------------------
LKB Global (Banking), Gtd. Notes, 6.00%,
01/25/06 3,000,000 1,954,445
- -------------------------------------------------------------------------------
2,465,580
- -------------------------------------------------------------------------------
ITALY - 2.37%
KFW International Finance Inc. (Finance -
Consumer Credit), Gtd. Notes, 11.625%,
11/27/98 ITL 1,800,000,000 1,291,740
- -------------------------------------------------------------------------------
Swedish Export Credit (Finance - Consumer
Credit), Unsub. Deb., 11.70%, 12/04/98 300,000,000 215,804
- -------------------------------------------------------------------------------
1,507,544
- -------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Non-
Convertible Bonds & Notes 7,673,018
- -------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES(e) - 4.35%
FRANCE - 0.51%
Societe Generale (Banking), Conv. Deb., 3.50%,
01/01/00 FRF 1,419,000 322,717
- -------------------------------------------------------------------------------
JAPAN - 2.58%
JUSCO Co. (Consumer Non-Durables), Conv. Deb.,
1.20%, 02/20/01 JPY 40,000,000 622,571
- -------------------------------------------------------------------------------
Matsushita Electric Industrial Co. Ltd.
(Electronic Components/ Miscellaneous), Conv.
Bonds, 1.30%, 03/29/02 50,000,000 511,614
- -------------------------------------------------------------------------------
Sony Corp. (Electronic
Components/Miscellaneous), Conv. Bonds, 1.40%,
09/30/03 6,000,000 72,533
- -------------------------------------------------------------------------------
Toyota Motor Corp. (Automobile -
Manufacturers), Conv. Bonds, 1.20%, 01/28/98 30,000,000 440,247
- -------------------------------------------------------------------------------
1,646 965
- -------------------------------------------------------------------------------
SWITZERLAND - 0.49%
Aderans Co. Ltd. (Cosmetics & Toiletries),
Conv. Deb., 0.875%, 08/31/98 CHF 400,000 310,049
- -------------------------------------------------------------------------------
UNITED KINGDOM - 0.77%
LASMO PLC (Oil Equipment & Supplies), Conv.
Bonds, 7.75%, 10/04/05 GBP 300,000 488,265
- -------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Convertible
Bonds & Notes 2,767,996
- -------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS & NOTES(e) - 19.88%
AUSTRALIA - 1.94%
Australian Government, Gtd. Deb., 10.00%,
10/15/07 AUD 600,000 566,666
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
AUSTRALIA - (CONTINUED)
Treasury Corp. of Victoria, Local Government Gtd.
Deb., 12.00%, 09/22/01 AUD 700,000 $ 665,665
- -------------------------------------------------------------------------------
1,232,331
- -------------------------------------------------------------------------------
CANADA - 2.91%
British Columbia Municipal Finance Authority, Deb.,
7.75%, 12/01/05 CAD 500,000 395,823
- -------------------------------------------------------------------------------
Canada Government, Gtd. Deb., 7.00%, 12/01/06 1,000,000 763,529
- -------------------------------------------------------------------------------
Ontario (Province of), Sr. Notes, 8.00%, 03/11/03 750,000 603,155
- -------------------------------------------------------------------------------
Quebec (Province of), Deb., 9.375%, 01/16/23 100,000 87,746
- -------------------------------------------------------------------------------
1,850,253
- -------------------------------------------------------------------------------
DENMARK - 1.85%
Kingdom of Denmark, Gtd. Deb., 8.00%, 11/15/01 DKK 6,250,000 1,177,684
- -------------------------------------------------------------------------------
GERMANY - 3.81%
Bundesrepublik Deutschland,
Deb., 6.00%, 09/15/03 DEM 1,000,000 675,396
- -------------------------------------------------------------------------------
Deb., 6.75%, 07/15/04 1,500,000 1,046,529
- -------------------------------------------------------------------------------
Deb., 6.875%, 05/12/05 1,000,000 700,221
- -------------------------------------------------------------------------------
2,422,146
- -------------------------------------------------------------------------------
NEW ZEALAND - 1.76%
New Zealand Government,
Gtd. Deb., 10.00%, 07/15/97 NZD 800,000 573,129
- -------------------------------------------------------------------------------
Gtd. Deb., 8.00%, 02/15/01 750,000 547,724
- -------------------------------------------------------------------------------
1,120,853
- -------------------------------------------------------------------------------
SWEDEN - 3.02%
Swedish Government,
Bonds, 10.25%, 05/05/03 SEK 6,000,000 1,070,030
- -------------------------------------------------------------------------------
Bonds, 6.00%, 02/09/05 6,000,000 852,373
- -------------------------------------------------------------------------------
1,922,403
- -------------------------------------------------------------------------------
UNITED KINGDOM - 4.59%
Ontario Province, Sr. Unsub. Deb., 6.875%, 09/15/00 GBP 465,000 771,580
- -------------------------------------------------------------------------------
United Kingdom Treasury Notes,
8.00%, 12/07/00 400,000 704,403
- -------------------------------------------------------------------------------
7.00%, 11/06/01 400,000 678,157
- -------------------------------------------------------------------------------
7.50%, 12/07/06 450,000 770,342
- -------------------------------------------------------------------------------
2,924,482
- -------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Government Bonds
& Notes 12,650,152
- -------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 2.18% SHARES
ADVERTISING/BROADCASTING - 0.00%
Time Warner Inc. - Series M, $102.50 PIK Conv. Pfd. 1 840
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
19
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRIC POWER - 0.75%
Citizens Utilities Co. - $2.50 Conv. Pfd. 10,000 $ 477,500
- -------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 1.43%
Conseco Inc. - $4.278 Conv. PRIDES 8,000 910,000
- -------------------------------------------------------------------------------
Total Convertible Preferred Stocks 1,388,340
- -------------------------------------------------------------------------------
WARRANTS - 0.03%
CABLE TELEVISION - 0.00%
Wireless One, Inc. - expiring 10/19/00(f) 420 420
- -------------------------------------------------------------------------------
GAMING - 0.00%
Boomtown, Inc. - expiring 11/01/98(f) (acquired
11/03/93; cost $150) 150 5
- -------------------------------------------------------------------------------
LEISURE & RECREATION - 0.01%
IHF Capital Inc. - expiring 11/14/99(f) 150 6,000
- -------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 0.01%
MVE Inc. - expiring 02/15/02(f) 190 5,700
- -------------------------------------------------------------------------------
STEEL - 0.00%
Gulf States Steel Inc. - expiring 04/15/03(f) 230 1,150
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.01%
Clearnet Communications Inc. - expiring 09/15/05(f) 891 5,346
- -------------------------------------------------------------------------------
Total Warrants 18,621
- -------------------------------------------------------------------------------
PRINCIPAL
U.S. TREASURY SECURITIES - 9.19% AMOUNTS(a)
Notes, 6.50%, 05/31/01 $5,000,000 5,059,400
- -------------------------------------------------------------------------------
Notes, 7.50%, 02/15/05 500,000 534,500
- -------------------------------------------------------------------------------
Notes, 6.75%, 08/15/26 250,000 252,008
- -------------------------------------------------------------------------------
Total U.S. Treasury Securities 5,845,908
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY - 0.96%
Tennessee Valley Authority, Bonds, 5.98%, 04/01/36 600,000 608,130
- -------------------------------------------------------------------------------
Total U.S. Government Agencies 608,130
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT(g) - 2.20%
Daiwa Securities America Inc., 6.25%, 01/02/97(h) 1,400,000 1,400,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 97.64% 62,124,891
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 2.36% 1,498,880
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $63,623,771
===============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Principal amount is in U.S. Dollars, except as indicated by note (e).
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at December 31, 1996 was
$4,238,396 which represented 6.77% of the Fund's net assets.
(c) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(d) Discounted bond at purchase. Interest rate represents coupon rate at which
the bond will accrue at a specified future date.
(e) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(f) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(g) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(h) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Abbreviations:
AUD -Australian Dollar Gtd. -Guaranteed
CAD -Canadian Dollar ITL -Italian Lire
CHF -Swiss Franc JPY -Japanese Yen
Conv. -Convertible Mtg. -Mortgage
Deb. -Debentures NZD -New Zealand Dollar
DEM -German Deutschemark PRIDES -Preferred Redemption
Disc. -Discounted Increase Dividend Equity
DKK -Danish Krone Security
FRF -French Franc Sec. -Secured
GBP -British Pound Sterling Sr. -Senior
Sub. -Subordinated Unsub. -Unsubordinated
AIM V.I. DIVERSIFIED INCOME FUND
20
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $60,088,932) $ 62,124,891
- ----------------------------------------------------------------------
Foreign currencies, at value (cost $25,959) 25,922
- ----------------------------------------------------------------------
Cash 127,117
- ----------------------------------------------------------------------
Receivables for:
Forward currency contracts 86,617
- ----------------------------------------------------------------------
Capital stock sold 118,389
- ----------------------------------------------------------------------
Interest 1,187,485
- ----------------------------------------------------------------------
Investment for deferred compensation plan 11,615
- ----------------------------------------------------------------------
Organizational costs, net 3,857
- ----------------------------------------------------------------------
Other assets 6,761
- ----------------------------------------------------------------------
Total assets 63,692,654
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock purchased 54
- ----------------------------------------------------------------------
Deferred compensation plan 11,615
- ----------------------------------------------------------------------
Accrued advisory fees 31,724
- ----------------------------------------------------------------------
Accrued administrative service fees 4,296
- ----------------------------------------------------------------------
Accrued directors' fees 1,969
- ----------------------------------------------------------------------
Accrued operating expenses 19,225
- ----------------------------------------------------------------------
Total liabilities 68,883
- ----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 63,623,771
======================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
======================================================================
Outstanding 6,161,471
======================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 10.33
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31,1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $4,006,506
- ------------------------------------------------------------------------------
Dividends 54,905
- ------------------------------------------------------------------------------
Total investment income 4,061,411
- ------------------------------------------------------------------------------
EXPENSES:
Advisory fees 306,235
- ------------------------------------------------------------------------------
Custodian fees 34,350
- ------------------------------------------------------------------------------
Administrative services fees 49,500
- ------------------------------------------------------------------------------
Directors' fees and expenses 7,323
- ------------------------------------------------------------------------------
Organizational costs 2,892
- ------------------------------------------------------------------------------
Other 40,919
- ------------------------------------------------------------------------------
Total expenses 441,219
- ------------------------------------------------------------------------------
Net investment income 3,620,192
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS TRANSACTIONS:
Net realized gain from:
Investment securities 538,946
- ------------------------------------------------------------------------------
Foreign currency transactions 140,909
- ------------------------------------------------------------------------------
Forward currency contracts 287,349
- ------------------------------------------------------------------------------
967,204
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 625,984
- ------------------------------------------------------------------------------
Foreign currency transactions (2,338)
- ------------------------------------------------------------------------------
Forward currency contracts 61,572
- ------------------------------------------------------------------------------
685,218
- ------------------------------------------------------------------------------
Net gain on investment securities, foreign currency transactions
and forward currency contracts 1,652,422
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $5,272,614
==============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
21
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,620,192 $ 2,460,409
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currency transactions, and forward
currency contracts 967,204 675,894
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currency transactions, and
forward currency contracts 685,218 2,440,780
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 5,272,614 5,577,083
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (3,857,482) (2,879,611)
- ------------------------------------------------------------------------------
Net equalization credits 905,775 653,844
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 16,672,719 16,007,644
- ------------------------------------------------------------------------------
Net increase in net assets 18,993,626 19,358,960
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 44,630,145 25,271,185
- ------------------------------------------------------------------------------
End of period $63,623,771 $44,630,145
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $59,753,245 $43,080,526
- ------------------------------------------------------------------------------
Undistributed net investment income 1,655,895 987,410
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) on
investment securities, foreign currency
transactions and forward currency contracts 95,809 (871,395)
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currency transactions and forward currency
contracts 2,118,822 1,433,604
- ------------------------------------------------------------------------------
$63,623,771 $44,630,145
==============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Diversified Income Fund (the "Fund"). The Fund's investment
objective is to seek to achieve a high level of current income. The Fund will
seek to achieve its objective by investing primarily in a diversified
portfolio of foreign and U.S. government and corporate debt securities,
including lower rated high yield debt securities (commonly known as "junk
bonds"). These high yield bonds may involve special risks in addition to the
risks associated with investment in higher rated debt securities. High yield
bonds may be more susceptible to real or perceived adverse economic and
competitive industry conditions than higher grade bonds. Also, the secondary
market in which high yield bonds are traded may be less liquid than the market
for higher grade bonds. Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations--Debt obligations are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as institution-size trading in similar
groups of securities, developments related to special securities, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which
prices are not provided by the pricing service and which are listed or
traded on an exchange are valued at the last sales price on the exchange
where the security is principally traded or, lacking any sales on a
particular day, at the mean between the closing bid and asked prices on
that day unless the Board of Directors, or persons designated by the Board
of Directors, determines that the over-
AIM V.I. DIVERSIFIED INCOME FUND
22
<PAGE>
the-counter quotations more closely reflect the current market value of the
security. Securities traded in the over-the-counter market, except (i)
securities priced by the pricing service, (ii) securities for which
representative exchange prices are available, and (iii) securities reported
in the NASDAQ National Market System, are valued at the mean between
representative last bid and asked prices obtained from an electronic
quotation reporting system, if such prices are available, or from established
market makers. Each security reported in the NASDAQ National Market System is
valued at the last sales price on the valuation date. Securities for which
market quotations are either not readily available or are questionable are
valued at fair value as determined in good faith by or under the supervision
of the Fund's officers in accordance with methods which are specifically
authorized by the Board of Directors. Short-term obligations having 60 days
or less to maturity are valued at amortized cost which approximates market
value. Short-term securities that mature in more than 60 days are valued at
current market quotations. Generally, trading in foreign securities as well
as corporate bonds and U.S. Government securities is substantially completed
each day at various times prior to the close of the New York Stock Exchange.
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange which will not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under
the supervision of the Board of Directors.
B. Foreign Currency Translation - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollars at date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Forward Currency Contracts - A forward currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a forward contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a currency contract for
the amount of a purchase or sale of a security denominated in a foreign
currency in order to "lock-in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
D. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. It is the policy of the Fund not to amortize market
discounts and premiums on bonds for financial reporting purposes. Realized
gains or losses from securities transactions are recorded on the identified
cost basis.
E. Federal Income Taxes - For federal income tax purposes, each portfolio in
the Company is taxed as a separate entity. It is the Fund's policy to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income and capital gains to its shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
The Fund had capital loss carryforwards (which may be carried forward to
offset future taxable capital gains, if any) of $259,399, which expires, if
not previously utilized, through the year 2003. The Fund cannot distribute
capital gains to shareholders until the tax loss carryforwards have been
utilized.
F. Equalization - The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and the costs of
repurchases of fund shares, equivalent on a per share basis to the amount
of undistributed net investment income, is credited or charged to
undistributed net income when the transaction is recorded so that
undistributed net investment income per share is unaffected by sales or
redemptions of Fund shares.
G. Organizational Costs - Organizational costs of the Fund of $14,461 are
being amortized over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.60% of
the first $250 million of the Fund's average daily net assets, plus 0.55% of
such Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1996, AIM was reimbursed $49,500 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1996, the Fund incurred legal fees of
$2,902 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest directors' fees,
if so elected by a director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1996 was $53,481,715 and $36,540,620, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $2,619,937
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (584,916)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $2,035,021
=========================================================================
</TABLE>
Cost of investments for tax purposes is $60,089,870.
AIM V.I. DIVERSIFIED INCOME FUND
23
<PAGE>
NOTE 5 - OPEN FORWARD CURRENCY CONTRACTS
Outstanding contracts at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACT TO CONTRACT TO APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
- ---------- -------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
01/27/97 DEM 2,600,000 $ 1,729,874 $ 1,692,712 $37,162
01/30/97 CHF 285,000 227,545 213,603 13,942
02/03/97 JPY 38,000,000 346,399 328,140 18,259
02/19/97 DEM 2,400,000 1,556,824 1,564,733 (7,909)
03/05/97 JPY 80,000,000 714,286 690,848 23,438
03/10/97 CHF 100,000 77,435 75,238 2,197
03/12/97 NZD 800,000 556,040 566,767 (10,727)
03/17/97 JPY 36,000,000 321,142 310,887 10,255
----------- ----------- -------
$5,529,545 $5,442,928 $86,617
=========== =========== =======
</TABLE>
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during year ended December 31, 1996 and
eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold 2,366,508 $ 22,865,918 1,807,566 $17,087,317
- ------------------------- ---------- ------------ --------- -----------
Issued as reinvestment of
distributions 377,444 3,857,482 293,522 2,823,374
- ------------------------- ---------- ------------ --------- -----------
Reacquired (1,044,208) (10,050,681) (409,796) (3,903,047)
- ------------------------- ---------- ------------ --------- -----------
1,699,744 $ 16,672,719 1,691,292 $16,007,644
========== ============ ========= ===========
</TABLE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, the eleven months ended December 31,
1995, the year ended January 31, 1995 and the period May 5, 1993 (date
operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------- -----------------
1996 1995 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.00 $ 9.12 $ 10.46 $ 10.00
- --------------------------------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.73 0.69 0.76 0.54
- --------------------------------- ------- ------- ------- -------
Net gains (losses) on
securities (both realized and
unrealized) 0.28 0.94 (1.42) 0.29
- --------------------------------- ------- ------- ------- -------
Total from investment
operations 1.01 1.63 (0.66) 0.83
- --------------------------------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income (0.68) (0.75) (0.68) (0.35)
- --------------------------------- ------- ------- ------- -------
Distributions from net realized
capital gains -- -- -- (0.02)
- --------------------------------- ------- ------- ------- -------
Total distributions (0.68) (0.75) (0.68) (0.37)
- --------------------------------- ------- ------- ------- -------
Net asset value, end of period $ 10.33 $ 10.00 $ 9.12 $ 10.46
- --------------------------------- ======= ======= ======= =======
Total return(a) 10.19% 18.11% (6.35)% 8.33%
- --------------------------------- ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $63,624 $44,630 $25,271 $14,530
- --------------------------------- ======= ======= ======= =======
Ratio of expenses to average net
assets(c) 0.86%(b) 0.88%(e) 0.91% 1.05%(e)
- --------------------------------- ======= ======= ======= =======
Ratio of net investment income to
average net assets(d) 7.09%(b) 7.65%(e) 8.07% 6.78%(e)
- --------------------------------- ======= ======= ======= =======
Portfolio turnover rate 76% 72% 100% 57%
- --------------------------------- ======= ======= ======= =======
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $51,024,610.
(c) After waiver of advisory fee and expense reimbursement. Ratios of expenses
to average net assets prior to waiver of advisory fees and/or expense
reimbursements are 1.03% and 1.69% (annualized) for January 31, 1995 and
1994, respectively.
(d) After waiver of advisory fee and expense reimbursement. Ratios of net
investment income to average net assets prior to waiver of advisory fees
and/or expense reimbursements are 7.95% and 6.14% (annualized) for January
31, 1995 and 1994, respectively.
(e) Annualized.
NOTE 8 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. DIVERSIFIED INCOME FUND
24
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Diversified Income Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1996, the related statement of operations for the year then
ended, the statement of changes in net assets for the year then ended and the
eleven month period ended December 31, 1995 and the financial highlights for
the year then ended, the eleven month period ended December 31, 1995, the year
ended January 31, 1995, and the period May 5, 1993 (commencement of
operations) through January 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Diversified Income Fund, as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and the eleven month period ended December 31, 1995 and the
financial highlights for the year then ended, the eleven month period ended
December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993
(commencement of operations) through January 31, 1994, in conformity with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. DIVERSIFIED INCOME FUND
25
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
FOREIGN UTILITIES FUEL
ATTRACTIVE RETURN IN 1996
A roundtable discussion with the Fund management team for
AIM V.I. Global Utilities Fund for the fiscal year ended December 31, 1996.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID AIM V.I. GLOBAL UTILI- Q. HOW WOULD YOU DESCRIBE MARKET Top 10 Holdings
TIES FUND PERFORM DURING THE FISCAL CONDITIONS DURING THE FISCAL As of 12/31/96
YEAR? YEAR? WERE THERE ANY TRENDS THAT
The Fund gained 12.07% in total INFLUENCED THE UTILITIES SECURITIES 1. Cincinnati Bell, Inc.
return for the year, surpassing the MARKET? 2. El Paso Natural Gas Co.
average return of 9.26% for similar A. There were a few. The domestic 3. Pinnacle West Capital Corp.
utility funds as measured by the economy was characterized by moderate 4. The Williams Cos., Inc.
Lipper Utility Funds Index. growth, low inflation, and interest 5. Enron Corp.
rates that were generally flat in the 6. FPL Group, Inc.
Q. WHAT HELPED THE FUND OUTPER- first half of the year and slightly 7. Allegheny Power System, Inc.
FORM THE LIPPER UTILITY FUNDS lower later in the year. However, 8. Sonat Inc.
INDEX FOR THE YEAR? overriding concerns about reports of 9. Ameritech Corp.
A. The Fund's global allocation unexpected strength in the economy 10. Southern Co.
has played a significant role. and the possibility of rising interest
We slowly tested the foreign rates caused considerable volatility in Please keep in mind that the Fund's
utility waters in 1995, and we financial markets for much of the year, portfolio composition is subject to
increased our foreign holdings and that affected utility stocks as well. change and there is no assurance the
in 1996. On the positive side, there were Fund will continue to hold any partic-
Domestic electric utilities did several mergers in the utility market: ular security.
not do well in 1996; however, foreign electric to electric, electric to gas,
electric utilities were attractive gas to electric, and domestic to foreign. Q. WHAT OTHER UTILITY SECTORS WERE
last year and performed nicely. Our On the global front, we are seeing more STRONG PERFORMERS?
increased foreign utility holdings privatization of government-owned elec- A. The telecommunications industry had
contributed significantly to the tric, gas, and telephone utilities. another outstanding year. There is
Fund's return last year and helped to Natural events also were also a factor-- such a tremendous amount of change
account for its attractive performance the harsh winter last year helped to occurring in telecommunications be-
compared to the Lipper Utility Funds Index. increase natural gas prices. cause of increasing technology:
wireless communications, modems, the
Q. WHAT PERCENTAGE OF THE FUND'S Q. HOW DID THE FUND TAKE ADVANTAGE Internet, just to name a few. There
HOLDINGS ARE NOW OVERSEAS? OF THOSE RISING GAS PRICES? are new companies coming into the
A. The Fund finished the fiscal year A. As gas prices rose, we increased marketplace, and older companies are
with 26% of its holdings in the foreign our holdings in natural gas companies doing more things to take advantage
sector and we expect that figure to to just over 11% of the portfolio, in- of that industry's explosive
continue to rise as we identify more cluding such market leaders as El Paso
foreign utilities with attractive Natural Gas Co., The Williams Co.,
earnings. The foreign sector of Sonat, Inc., and Enron Corp. Natural
utilities appears to offer greater gas companies saw their earnings
opportunity for growth than is increase by 20% in 1996.
currently available with domestic
utilities.
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
26
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
growth. We thought telecommunications on the cutting edge of new telecommu- tions industries, and we could see
would be a good sector for us, and nications technology. One such company it with deregulation of the domestic
that sector's returns were better is Lucent Technologies, a new offering electric utilities industry as we
than we expected. which once was AT&T's technological approach the end of the century.
laboratory. There are more mergers and acquisi-
Q. HOW DID YOU MANAGE YOUR HOLDINGS tions than ever before.
WITHIN THE TELECOMMUNICATIONS SECTOR? Q. THE UTILITY INDUSTRY SEEMS TO BE The foreign utilities sector seems
UNDERGOING A LOT OF CHANGE. poised to provide real growth oppor-
A. We reduced our holdings of the tunities not available just a few
regional Bells and long distance A. Change is the prevalent factor years ago. The utility industry is
companies and increased our holdings in the utilities sector. We first saw rapidly changing, and we believe
in companies it with deregulation in the natural that will provide outstanding growth
gas and telecommunica- opporutnities for the Fund in the
future while keeping volatility low-
utility stocks tend to be less
volatile than other sectors of the
market.
Q. INTEREST RATES ALWAYS ARE A
CONCERN WHEN IT COMES TO UTILITIES.
HOW INTEREST-RATE SENSITIVE IS THE
PORTFOLIO?
A. If interest rates were to rise,
then the higher yielding domestic
utilities might suffer somewhat.
However, given the increase in
foreign holdings, the Fund is less
sensitive to changes in the U.S.
interest-rate environment. Interest
rates don't necessarily move in
tandem around the world, so a change
in interest rates in the U.S may
have a different effect, or no
effect at all, on the interest rates
of other countries. By reducing our
exposure to the U.S., we have better
diversified the portfolio.
Q. WHAT IS YOU MARKET OUTLOOK FOR
UTILITIES IN THE NEAR FUTURE?
Growth of a $10,000 Investment
From 5/2/94 - 12/31/96 A. The utility industry is in the
midst of a rapidly changing
environment. That's exciting. We
AIM Global S&P 50 Lipper Utility anticipate continuing break-throughs
Utilities Fund Stock Index Funds Index in telecommunications, and the
(In thousands) prospects in the foreign utilities
<S> <C> <C> <C> markets are enticing. Both of those
5/2/94 $10,000 $10,000 $10,000 areas offer the Fund the best
7/94 9,920 10,193 9,848 chances of real growth, while
10/94 9,921 10,581 9,777 domestic electric utilities continue
1/95 9,944 10,615 9,938 to offer attractive dividends.
4/95 10,259 11,687 10,241
7/95 11,015 12,847 10,815 Given the global outlook for stable
10/95 11,626 13,370 11,509 interest rates and healthy, moderate
1/96 12,441 14,708 12,409 growth in most areas in which the
4/96 12,420 15,209 12,171 Fund invests, conditions appear
7/96 12,282 14,962 12,012 favorable for utility companies and
10/96 13,138 16,582 12,724 the Fund in 1997.
12/96 13,789 17,506 13,322
AVERAGE ANNUAL TOTAL RETURN Past performance cannot guarantee comparable
As of 12/31/96 future results.
1 Year 12.07%
Inception (5/2/94) 12.80
The performance figures shown represent the AIM V.I. Global Utilities Fund
and are not intended to reflect actual annuity values, and do not reflect
charges at the separate account level which, if applied, would lower the
performance results. The Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in the net asset value. The
Fund's investment return and principal value will fluctuate so that Fund shares,
when redeemed, may be worth more or less than their original cost. Source:
Towers Data Systems HYPO.--Registered Trademark--
Lipper Analytical Services Inc., is an independent mutual fund performance
monitor. The unmanaged Lipper Utility Funds Index represents an average of the
30 largest utilities funds.
The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of the
stock market in general. Source: Towers Data Systems HYPO.--Registered Trademark--
An investment cannot be made in any index listed. Index results include
reinvested dividends.
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
27
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 50.61%
ADVERTISING/BROADCASTING - 0.30%
Univision Communications, Inc.(a) 1,100 $ 40,700
- ----------------------------------------------------------------------
COMPUTER MAINFRAMES - 0.20%
ViaSat, Inc.(a) 3,000 27,000
- ----------------------------------------------------------------------
COMPUTER NETWORKING - 0.78%
Ascend Communications, Inc.(a) 1,700 105,613
- ----------------------------------------------------------------------
COMPUTER PERIPHERALS - 0.21%
U.S. Robotics Corp.(a) 400 28,800
- ----------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 0.38%
Puma Technology, Inc.(a) 1,900 32,775
- ----------------------------------------------------------------------
White Pine Software, Inc.(a) 2,700 19,575
- ----------------------------------------------------------------------
52,350
- ----------------------------------------------------------------------
ELECTRIC POWER - 18.24%
AES Corp.(a) 1,000 46,500
- ----------------------------------------------------------------------
Allegheny Power System, Inc. 7,800 236,925
- ----------------------------------------------------------------------
Carolina Power & Light Co. 3,900 142,350
- ----------------------------------------------------------------------
Destec Energy, Inc.(a) 2,900 45,312
- ----------------------------------------------------------------------
DQE, Inc. 6,200 179,800
- ----------------------------------------------------------------------
Edison International 3,300 65,588
- ----------------------------------------------------------------------
FPL Group, Inc. 5,300 243,800
- ----------------------------------------------------------------------
GPU, Inc. 6,000 201,751
- ----------------------------------------------------------------------
Houston Industries, Inc. 5,300 119,912
- ----------------------------------------------------------------------
Illinova Corp. 4,800 132,000
- ----------------------------------------------------------------------
NIPSCO Industries, Inc. 5,600 221,900
- ----------------------------------------------------------------------
Pinnacle West Capital Corp. 11,200 355,600
- ----------------------------------------------------------------------
Sierra Pacific Resources 2,500 71,875
- ----------------------------------------------------------------------
Southern Co. 10,300 233,038
- ----------------------------------------------------------------------
Texas Utilities Co. 4,400 179,300
- ----------------------------------------------------------------------
2,475,651
- ----------------------------------------------------------------------
ENERGY (ALTERNATE SOURCES) - 1.46%
Calenergy, Inc.(a) 2,100 70,613
- ----------------------------------------------------------------------
Teco Energy, Inc. 5,300 127,863
- ----------------------------------------------------------------------
198,476
- ----------------------------------------------------------------------
GAS DISTRIBUTION - 1.46%
KN Energy, Inc. 1,500 58,875
- ----------------------------------------------------------------------
Public Service Co. of Colorado 3,600 139,950
- ----------------------------------------------------------------------
198,825
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NATURAL GAS PIPELINE - 10.84%
Columbia Gas System, Inc. 1,700 $ 108,163
- ----------------------------------------------------------------------
El Paso Natural Gas Co. 7,800 393,900
- ----------------------------------------------------------------------
Enron Corp. 5,300 228,562
- ----------------------------------------------------------------------
PanEnergy Corp. 4,200 189,000
- ----------------------------------------------------------------------
Sonat, Inc. 4,600 236,900
- ----------------------------------------------------------------------
Williams Companies, Inc. (The) 8,400 315,000
- ----------------------------------------------------------------------
1,471,525
- ----------------------------------------------------------------------
OIL & GAS (SERVICES) - 0.22%
TPC Corp.(a) 3,300 29,700
- ----------------------------------------------------------------------
REAL ESTATE - 0.52%
Cali Realty Corp. 2,300 71,012
- ----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 2.24%
Crescent Real Estate Equities, Inc. 800 42,200
- ----------------------------------------------------------------------
Meditrust Corp. 1,300 52,000
- ----------------------------------------------------------------------
OMEGA Healthcare Investors, Inc. 1,700 56,525
- ----------------------------------------------------------------------
Patriot American Hospitality, Inc. 1,700 73,313
- ----------------------------------------------------------------------
Public Storage, Inc. 1,500 46,500
- ----------------------------------------------------------------------
Starwood Lodging Trust 600 33,075
- ----------------------------------------------------------------------
303,613
- ----------------------------------------------------------------------
TELECOMMUNICATIONS - 4.46%
ADC Telecommunications, Inc.(a) 3,100 96,488
- ----------------------------------------------------------------------
AT&T Corp. 1,500 65,250
- ----------------------------------------------------------------------
CellNet Data Systems Inc.(a) 2,300 33,638
- ----------------------------------------------------------------------
Frontier Corp. 4,000 90,500
- ----------------------------------------------------------------------
Lucent Technologies, Inc. 1,700 78,625
- ----------------------------------------------------------------------
McLeod, Inc. -- Class A(a) 2,100 53,550
- ----------------------------------------------------------------------
MFS Communications Company, Inc.(a) 62 3,379
- ----------------------------------------------------------------------
Superior Telecom Inc.(a) 2,500 50,937
- ----------------------------------------------------------------------
Teleport Communications Group Inc. - Class A(a) 1,300 39,650
- ----------------------------------------------------------------------
360 Communications Co.(a) 1,400 32,375
- ----------------------------------------------------------------------
WorldCom, Inc.(a) 2,338 60,934
- ----------------------------------------------------------------------
605,326
- ----------------------------------------------------------------------
TELEPHONE - 9.30%
Ameritech Corp. 3,900 236,437
- ----------------------------------------------------------------------
BellSouth Corp. 5,300 213,988
- ----------------------------------------------------------------------
Century Telephone Enterprises 3,700 114,238
- ----------------------------------------------------------------------
Cincinnati Bell, Inc. 6,500 400,562
- ----------------------------------------------------------------------
GTE Corp. 2,200 100,100
- ----------------------------------------------------------------------
SBC Communications, Inc. 3,800 196,650
- ----------------------------------------------------------------------
1,261,975
- ----------------------------------------------------------------------
Total Domestic Common Stocks 6,870,566
- ----------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
28
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 2.78%
ADVERTISING/BROADCASTING - 0.43%
Time Warner Inc. - Series M, 10.25% Conv. PIK Pfd. 53 $ 57,516
- -------------------------------------------------------------------------------
ELECTRIC SERVICES - 0.42%
Citizens Utilities Co. - $2.50 Conv. Pfd. 1,200 57,300
- -------------------------------------------------------------------------------
GAS UTILITY - 0.57%
MCN Corp. - $2.01 Conv. Pfd. PRIDES 2,800 77,350
- -------------------------------------------------------------------------------
OIL & GAS (SERVICES) - 0.44%
Enron Corp. - $1.36 Conv. Pfd. 2,500 60,000
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.74%
MFS Communications Company, Inc. - $2.68 Conv. Pfd. 1,100 100,375
- -------------------------------------------------------------------------------
TELEPHONE - 0.18%
Salomon Inc. - $3.48 Conv. Pfd. 400 24,100
- -------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 376,641
- -------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 22.35%
ARGENTINA - 0.66%
Central Costanera S.A. - Class B (Electric Services) 20,700 63,355
- -------------------------------------------------------------------------------
Telefonica de Argentina S.A. - ADR (Telephone) 1,000 25,875
- -------------------------------------------------------------------------------
89,230
- -------------------------------------------------------------------------------
AUSTRALIA - 0.14%
News Corp. Ltd. - $5.00 Conv. Pfd.(b)
(Advertising/Broadcasting) (Acquired 11/04/96; Cost
$20,000) 200 18,875
- -------------------------------------------------------------------------------
AUSTRIA - 0.15%
Oesterreichische Elektrizitaetswirtschafts A.G. - Class
A (Electric Services) 270 20,209
- -------------------------------------------------------------------------------
BRAZIL - 1.02%
Eletricidade de Sao Paulo S.A.(a) (Electric Services) 210 31,022
- -------------------------------------------------------------------------------
Telecomunicacoes Brasileiras S.A. Telebras - ADR
(Telecommunications) 1,400 107,100
- -------------------------------------------------------------------------------
138,122
- -------------------------------------------------------------------------------
CANADA - 1.30%
Manitoba Telephone System(a) (Telecommunications) 5,000 47,470
- -------------------------------------------------------------------------------
TELUS Corp. (Telecommunications) 4,300 62,492
- -------------------------------------------------------------------------------
Westcoast Energy, Inc. (Natural Gas Pipeline) 4,000 67,000
- -------------------------------------------------------------------------------
176,962
- -------------------------------------------------------------------------------
CHILE - 1.48%
Cia. de Telecomunicaciones de Chile S.A. - ADR
(Telecommunications) 1,000 101,125
- -------------------------------------------------------------------------------
Empresa Nacional de Electricidad S.A. - ADR (Electric
Services) 1,400 21,700
- -------------------------------------------------------------------------------
Enersis S.A. - ADR (Electric Services) 2,800 77,700
- -------------------------------------------------------------------------------
200,525
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GERMANY - 0.98%
Deutsche Telekom - ADR(a) (Telephone) 3,500 $ 71,313
- -------------------------------------------------------------------------------
VEBA A.G. (Electric Services) 1,060 61,308
- -------------------------------------------------------------------------------
132,621
- -------------------------------------------------------------------------------
HONG KONG - 0.27%
Asia Satellite Telecommunications Holdings Ltd. - ADR(a)
(Telecommunications) 1,600 37,400
- -------------------------------------------------------------------------------
INDONESIA - 0.26%
PT Indosat - ADR (Telecommunications) 1,300 35,588
- -------------------------------------------------------------------------------
ISRAEL - 0.67%
ECI Telecommunications Ltd. Designs (Computer
Networking) 1,500 31,875
- -------------------------------------------------------------------------------
Tadiran Telecommunications Ltd. (Telecommunications) 1,900 42,513
- -------------------------------------------------------------------------------
TTI Team Telecom International Ltd.(a)
(Telecommunications) 2,600 16,250
- -------------------------------------------------------------------------------
90,638
- -------------------------------------------------------------------------------
ITALY - 0.71%
Telecom Italia Mobile S.p.A. (Telecommunications) 15,325 38,843
- -------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telecommunications) 22,000 57,139
- -------------------------------------------------------------------------------
95,982
- -------------------------------------------------------------------------------
JAPAN - 0.28%
Nippon Telegraph & Telephone (Telecommunications) 5 37,907
- -------------------------------------------------------------------------------
NETHERLANDS - 0.35%
Royal PTT Nederland N.V. (Telephone) 270 10,306
- -------------------------------------------------------------------------------
Royal PTT Nederland N.V. - ADR (Telephone) 995 37,685
- -------------------------------------------------------------------------------
47,991
- -------------------------------------------------------------------------------
NEW ZEALAND - 1.43%
Telecom Corp. of New Zealand Ltd. - ADR
(Telecommunications) 2,400 194,400
- -------------------------------------------------------------------------------
PERU - 0.48%
Luz Del Sur S.A.(a) (Electric Services) 1,700 30,706
- -------------------------------------------------------------------------------
Telefonica del Peru S.A. - ADR(a) (Telecommunications) 1,800 33,975
- -------------------------------------------------------------------------------
64,681
- -------------------------------------------------------------------------------
PORTUGAL - 0.82%
Portugal Telecom S.A. - ADR (Telecommunications) 3,500 98,875
- -------------------------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.(a)
(Telecommunications) 200 12,450
- -------------------------------------------------------------------------------
111,325
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
29
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SOUTH KOREA - 0.36%
Korea Electric Power Corp. - ADR (Electric Services) 2,400 $ 49,200
- ----------------------------------------------------------------------------
SPAIN - 2.86%
Autopistas Concesionaria Espanola S.A. (Engineering &
Construction) 3,900 53,772
- ----------------------------------------------------------------------------
Empresa Nacional de Electricidad S.A. - ADR (Electric
Services) 1,100 77,000
- ----------------------------------------------------------------------------
Iberdrola S.A. (Electric Services) 10,900 154,485
- ----------------------------------------------------------------------------
Telefonica de Espana - ADR (Telecommunications) 1,500 103,875
- ----------------------------------------------------------------------------
389,132
- ----------------------------------------------------------------------------
SWEDEN - 0.49%
Telefonaktiebolaget LM Ericsson - ADR
(Telecommunications) 2,200 66,412
- ----------------------------------------------------------------------------
UNITED KINGDOM - 6.29%
British Sky Broadcasting Group PLC - ADR
(Advertising/Broadcasting) 500 26,250
- ----------------------------------------------------------------------------
Hyder PLC (Water Supply) 2,510 31,972
- ----------------------------------------------------------------------------
London Electricity PLC (Electric Services) 6,400 74,614
- ----------------------------------------------------------------------------
National Grid Group PLC (Electric Services) 4,734 15,856
- ----------------------------------------------------------------------------
National Power PLC (Electric Services) 11,950 100,112
- ----------------------------------------------------------------------------
National Power PLC - ADR (Electric Services) 900 30,487
- ----------------------------------------------------------------------------
Nynex CableComms Group - ADR(a) (Telecommunications) 2,100 38,062
- ----------------------------------------------------------------------------
PowerGen PLC (Electric Services) 9,050 88,996
- ----------------------------------------------------------------------------
PowerGen PLC - ADR (Electric Services) 1,100 43,450
- ----------------------------------------------------------------------------
Scottish Power PLC (Electric Services) 9,750 58,964
- ----------------------------------------------------------------------------
Southern Electric PLC(a) (Electric Services) 3,416 46,584
- ----------------------------------------------------------------------------
United Utilities PLC (Water Supply) 8,925 94,953
- ----------------------------------------------------------------------------
Wessex Water PLC (Water Supply) 5,450 34,732
- ----------------------------------------------------------------------------
Yorkshire Electricity Group PLC (Electric Services) 6,500 89,643
- ----------------------------------------------------------------------------
Yorkshire Water PLC (Water Supply) 6,600 79,716
- ----------------------------------------------------------------------------
854,391
- ----------------------------------------------------------------------------
VENEZUELA - 1.35%
Cia. Anonima Nacional Telefonos de Venezuela(a)
(Telephone) - ADR 6,500 182,813
- ----------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 3,034,404
- ----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC CONVERTIBLE BONDS - 0.93%
CABLE TELEVISION - 0.67%
International Cabletel Inc., Conv. Sub. Notes, 7.00%,
06/15/08 $ 100,000 91,750
- ----------------------------------------------------------------------------
SEMICONDUCTORS - 0.26%
Analog Devices, Conv. Sub. Notes, 3.50%, 12/01/00 25,000 34,922
- ----------------------------------------------------------------------------
Total Domestic Convertible Bonds 126,672
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC NON-CONVERTIBLE BONDS - 7.92%
ADVERTISING/BROADCASTING - 1.89%
Comcast Corp., Sr. Sub. Deb., 9.50%, 01/15/08 $ 100,000 $ 104,000
- ------------------------------------------------------------------------------
Time Warner, Inc., Deb., 6.85%, 01/15/26 75,000 73,739
- ------------------------------------------------------------------------------
Time Warner, Inc., Notes, 8.18%, 08/15/07 75,000 78,195
- ------------------------------------------------------------------------------
255,934
- ------------------------------------------------------------------------------
ELECTRIC SERVICES - 1.97%
Arizona Public Service Co., Deb., 8.00%, 12/30/15 75,000 75,827
- ------------------------------------------------------------------------------
El Paso Electric Co., First Mortgage Bonds, 8.90%,
02/01/06 75,000 78,340
- ------------------------------------------------------------------------------
Indiana Michigan Power, Deb., 9.82%, 12/07/22 93,435 112,731
- ------------------------------------------------------------------------------
266,898
- ------------------------------------------------------------------------------
ENERGY (ALTERNATE SOURCES) - 1.37%
AES Corp., Sr. Sub. Notes, 10.25%, 07/15/06 75,000 80,625
- ------------------------------------------------------------------------------
California Energy Co., Disc. Notes, 10.25%, 01/15/04(c) 100,000 106,000
- ------------------------------------------------------------------------------
186,625
- ------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 0.61%
GMAC, Notes, 9.00%, 10/15/02 75,000 82,576
- ------------------------------------------------------------------------------
GAS DISTRIBUTION - 0.56%
Ferrellgas Partners, Sr. Notes, 9.375%, 06/15/06 75,000 76,594
- ------------------------------------------------------------------------------
NATURAL GAS PIPELINE - 0.35%
PanEnergy Corp., Notes, 7.875%, 08/15/04 45,000 47,538
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.17%
AT&T Corp., Sr. Notes, 7.75%, 03/01/07 150,000 159,025
- ------------------------------------------------------------------------------
Total Domestic Non-Convertible Bonds 1,075,190
- ------------------------------------------------------------------------------
FOREIGN NON-CONVERTIBLE BONDS - 3.77%
CANADA - 3.77%(d)
Bell Canada (Telecommunications), Deb., 10.875%,
10/11/04 50,000 45,600
- ------------------------------------------------------------------------------
Bell Canada (Telecommunications), Deb.,
Series EW, 8.80%, 08/17/05 50,000 41,682
- ------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas - Services), Deb.,
11.00%, 10/31/00 100,000 85,591
- ------------------------------------------------------------------------------
Ontario Hydro (Electric Power), Global Bonds, 9.00%,
06/24/02 100,000 83,897
- ------------------------------------------------------------------------------
Teleglobe Canada, Inc. (Telecommunications), Deb.,
8.35%, 06/20/03 100,000 80,603
- ------------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas - Services), Series
MTN, 8.55%, 02/01/06 70,000 57,291
- ------------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas - Services), Series Q
Deb., 10.625%, 10/20/09 125,000 117,094
- ------------------------------------------------------------------------------
Total Foreign Non-Convertible Bonds 511,758
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
30
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES - 2.19%
U.S. TREASURY BONDS - 1.07%
7.625%, 02/15/25 $ 130,000 $ 144,397
- -------------------------------------------------------------------------
U.S. TREASURY NOTES - 1.12%
6.625%, 06/30/01 150,000 152,507
- -------------------------------------------------------------------------
Total U.S. Treasury Securities 296,904
- -------------------------------------------------------------------------
TOTAL INVESTMENTS (excluding
Repurchase Agreements) 12,292,135
- -------------------------------------------------------------------------
REPURCHASE AGREEMENT - 11.16%(e)
Daiwa Securities America Inc., 6.25%, 01/02/97(f) 1,515,191 1,515,191
- -------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 101.71% 13,807,326
- -------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (1.71%) (231,753)
- -------------------------------------------------------------------------
NET ASSETS - 100.00% $13,575,573
=========================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933,
as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 12/31/96, was $18,875 which
represented 0.14% of the Fund's net assets.
(c) Discounted bond at purchase. Interest rate shown represents coupon at
which bond will accrue at a specified future date.
(d) Foreign denominated security. Par value and coupon are denominated in
Canadian dollars.
(e) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(f) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Abbreviations:
ADR- American Depository Receipt
Conv.- Convertible
Deb.- Debentures
MTN- Medium Term Notes
Pfd.- Preferred
PIK- Payment in Kind
PRIDES- Preferred Redeemable Increased Dividend Equity Securities
Sr.- Senior
Sub.- Subordinated
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
31
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $11,963,690) $13,807,326
- ---------------------------------------------------------------------
Foreign currencies, at value (cost $6,367) 6,395
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 7,484
- ---------------------------------------------------------------------
Investments sold 5,138
- ---------------------------------------------------------------------
Dividends and interest 64,319
- ---------------------------------------------------------------------
Investment for deferred compensation plan 8,768
- ---------------------------------------------------------------------
Other assets 34
- ---------------------------------------------------------------------
Total assets 13,899,464
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 283,820
- ---------------------------------------------------------------------
Capital stock reacquired 3,213
- ---------------------------------------------------------------------
Deferred compensation plan 8,768
- ---------------------------------------------------------------------
Accrued advisory fees 7,189
- ---------------------------------------------------------------------
Accrued directors' fees 1,551
- ---------------------------------------------------------------------
Accrued administrative services fees 4,596
- ---------------------------------------------------------------------
Accrued operating expenses 14,754
- ---------------------------------------------------------------------
Total liabilities 323,891
- ---------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $13,575,573
=====================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 1,081,455
=====================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $12.55
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $20,547 foreign withholding tax) $ 376,396
- ------------------------------------------------------------------------
Interest 181,549
- ------------------------------------------------------------------------
Total investment income 557,945
- ------------------------------------------------------------------------
EXPENSES:
Advisory fees 73,008
- ------------------------------------------------------------------------
Custodian fees 24,662
- ------------------------------------------------------------------------
Administrative services fees 47,729
- ------------------------------------------------------------------------
Directors' fees and expenses 6,181
- ------------------------------------------------------------------------
Professional fees 16,688
- ------------------------------------------------------------------------
Other 5,378
- ------------------------------------------------------------------------
Total expenses 173,646
- ------------------------------------------------------------------------
Less expenses assumed by advisor (15,954)
- ------------------------------------------------------------------------
Net expenses 157,692
- ------------------------------------------------------------------------
Net investment income 400,253
- ------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain from:
Investment securities 65,722
- ------------------------------------------------------------------------
Foreign currency transactions 2,007
- ------------------------------------------------------------------------
67,729
- ------------------------------------------------------------------------
Unrealized appreciation of:
Investment securities 880,191
- ------------------------------------------------------------------------
Foreign currencies 407
- ------------------------------------------------------------------------
880,598
- ------------------------------------------------------------------------
Net gain on investment securities and foreign currencies 948,327
- ------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,348,580
========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
32
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 400,253 $ 180,945
- -------------------------------------------------------------------------------
Net realized gain from investment securities and
foreign currency transactions 67,729 80,096
- -------------------------------------------------------------------------------
Net unrealized appreciation of investment securities
and foreign currencies 880,598 929,383
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,348,580 1,190,424
- -------------------------------------------------------------------------------
Net increase from capital stock transactions 4,317,451 4,441,375
- -------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (410,247) (186,096)
- -------------------------------------------------------------------------------
Distributions from net realized capital gains (74,178) (9,403)
- -------------------------------------------------------------------------------
Net increase in net assets 5,181,606 5,436,300
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 8,393,967 2,957,667
- -------------------------------------------------------------------------------
End of period $13,575,573 $8,393,967
===============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $11,740,457 $7,423,006
- -------------------------------------------------------------------------------
Undistributed net investment income (3,023) (769)
- -------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign currency
transactions (5,748) 8,441
- -------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 1,843,887 963,289
- -------------------------------------------------------------------------------
$13,575,573 $8,393,967
===============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Global Utilities Fund (the "Fund"). The Fund's investment
objective is to achieve a high level of current income, and as a secondary
objective the Fund seeks to achieve capital appreciation, by investing
primarily in the common and preferred stocks of public utility companies
(either domestic or foreign). Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - Equity securities, including warrants, that are
listed on a national securities exchange or part of the NASDAQ National
Market System are valued at the last reported sales price or if there has
been no sale that day, at the mean between the closing bid and asked prices
on that day. If a mean is not available, as is the case in some foreign
markets, the closing bid will be used absent a last sales price. Debt
securities are valued on the basis of valuations furnished by a pricing
service, which determines valuations for normal, institutional-size trading
units of such securities using market information, transactions for
comparable securities and various relationships between securities which
are generally recognized by institutional traders. Securities traded in the
over-the-counter market, except (i) securities priced by the pricing
service, (ii) securities for which representative exchange prices are
available, and (iii) securities reported in the NASDAQ National Market
System, are valued at the mean between representative last bid and asked
prices obtained from an electronic quotation reporting system, if such
prices are available, or from established market makers. Short-term
investments with remaining maturities of up to and including 60 days are
valued at amortized cost which approximates market value. Short-term
securities that mature in more than 60 days are valued at current market
AIM V.I. GLOBAL UTILITIES FUND
33
<PAGE>
quotations. Securities for which market quotations either are not readily
available or are questionable are valued at fair value as determined in good
faith by, or under the authority of, the Board of Directors. Generally,
trading in foreign securities is substantially completed each day at various
times prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis. On December 31, 1996,
undistributed net investment income was increased by $7,740 and
undistributed net realized gains reduced by $7,740 in order to comply with
the requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollars at date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
E. Forward Currency Contracts - A forward currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a forward contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a currency contract for
the amount of a purchase or sale of a security denominated in a foreign
currency in order to "lock-in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million. During the year
ended December 31, 1996, AIM waived advisory fees of $15,954.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1996, AIM was reimbursed $47,729 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1996, the Fund incurred legal fees of
$2,978 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1996 was $8,584,434 and $4,925,603, respectively.
The amount of unrealized appreciation of investment securities, on a tax
basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $1,932,636
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (95,691)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $1,836,945
=========================================================================
</TABLE>
Cost of investments for tax purposes is $11,970,381.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold 578,877 $6,900,184 535,828 $5,682,400
- -------------------------------------------------------------------------
Issued as reinvestment of
distributions 39,804 484,425 17,742 195,499
- -------------------------------------------------------------------------
Reacquired (258,571) (3,067,158) (134,462) (1,436,524)
- -------------------------------------------------------------------------
360,110 $4,317,451 419,108 $4,441,375
=========================================================================
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
34
<PAGE>
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Fund share outstanding during
the year ended December 31,1996, the eleven months ended December 31, 1995 and
the period May 2, 1994 (date operations commenced) through January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
--------------------- -----------
1996 1995 1995
------- ------ -----------
<S> <C> <C> <C>
Net asset value, beginning of period $11.64 $9.69 $10.00
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.40 0.29 0.27
- --------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.99 1.98 (0.33)
- --------------------------------------------------------------------------------
Total from investment operations 1.39 2.27 (0.06)
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.41) (0.31) (0.25)
- --------------------------------------------------------------------------------
Distributions from capital gain (0.07) (0.01) --
- --------------------------------------------------------------------------------
Total distributions (0.48) (0.32) (0.25)
- --------------------------------------------------------------------------------
Net asset value, end of period $12.55 $11.64 $ 9.69
================================================================================
Total return(a) 12.07% 23.73% (0.56)%
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $13,576 $8,394 $2,958
================================================================================
Ratio of expenses to average net
assets 1.40%(b)(c) 1.47%(c)(e) 1.31%(f)
================================================================================
Ratio of net investment income to
average net assets 3.56%(b)(d) 3.76%(d)(e) 4.39%(f)
================================================================================
Portfolio turnover rate 47% 58% 69%
================================================================================
Average broker commission rate(g) $0.0477 N/A N/A
================================================================================
</TABLE>
(a) Totals return are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $11,229,919.
(c) Ratios of expenses to average net assets prior to waiver of advisory fees
are 1.55% and 2.44% for 1996 and 1995, respectively.
(d) Ratios of net investment income to average net assets prior to waiver of
advisory fees are 3.42% and 2.79% for 1996 and 1995, respectively.
(e) Annualized.
(f) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees and expense reimbursements are
2.80% and 2.90%, respectively.
(g) Disclosure requirement beginning with the Fund's fiscal year ended
December 31, 1996.
NOTE 7 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. GLOBAL UTILITIES FUND
35
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Global Utilities Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1996, the related statement of operations for the year then ended, the
statement of changes in net assets for the year then ended and for the eleven
month period ended December 31, 1995 and the financial highlights for the year
then ended and for the eleven month period ended December 31, 1995 and the
period May 2, 1994 (commencement of operations) through January 31, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. Where
brokers did not reply to our confirmation requests, we carried out other
appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Global Utilities Fund, as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and for the eleven month period ended December 31, 1995 and the
financial highlights for the year then ended and for the eleven month period
ended December 31, 1995 and the period May 2, 1994 (commencement of operations)
through January 31, 1995, in conformity with generally accepted accounting
principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. GLOBAL UTILITIES FUND
36
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
MORTGAGES ARE BEST PERFORMING
GOVERNMENT BOND SEGMENT IN 1996
A roundtable discussion with the Fund management team for
AIM V.I. Government Securities Fund for the fiscal year ended December 31, 1996.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. BONDS FACED A TUMULTUOUS YEAR. HOW Portfolio Composition
DID AIM V.I. GOVERNMENT SECURITIES As of 12/31/96
FUND PERFORM DURING THE REPORTING PERIOD?
Mortgage-backed Obligations 46.39%
A. Uncertain economic conditions and U.S. Agency Obligations 31.39
ongoing inflation concerns took their Cash Equivalents 7.01
toll on financial markets in 1996, and U.S. Treasury Obligations 15.21
particularly in fixed-income securities.
The Fund's performance was similarly
affected-its total return was 2.29% for
the year ended December 31, 1996. BREAKDOWN OF MORTGAGE-BACKED OBLIGATIONS
Federal National Mortgage Assn. 49.54%
Federal Home Loan Mortgage Corp. 42.08
Q. WHAT FACTORS HAVE PRESSURED THE Government National Mortgage Assn. 8.38
PERFORMANCE OF FIXED-INCOME SECURITIES?
Please keep in mind that the Fund's portfolio composition is subject to
A. Uncertainty was the principal driver in change and there is no assurance the Fund will continue to hold any
bond market performance in 1996, and that particular security.
creates volatility. It centered around
changing indications in the economy. When that the economic growth was moderate rities-where some 46% of the Fund's
the Federal Reserve Board cut interest without rising inflation. The advance assets were invested-outperformed U.S.
rates on January 31, investors were and then decline in market yields over Treasury securities of equivalent
comfortable with the economic outlook- the course of 1996 led one market duration. The mortgage sector was
moderate growing without rising inflation. strategist to dub it "a round-trip year." aided by a boost in demand from such
Early in March, financial markets were Despite the fluctuations experienced in agencies as Federal National Mortgage
stunned by economic reports that revealed the investment-grade market in 1996, Association and Federal Home Loan
the economy was growing with surprising the Fund's diversified approach moderated Mortgage Corporation that purchased
strength, which could lead to rising this volatility while providing enhanced approximately $80 billion in mortgage
inflation. That sent stock and bond return. securities in 1996.
prices tumbling as markets attempted to Mortgage-backed securities also
anticipate whether the Fed would choose to benefited when interest rates were
boost interest rates to reign in an over- Q. HOW DID THESE FACTORS AFFECT THE increasing. As mortgage rates topped
heating economy. FUND? 8%, homeowners were discouraged from
Reflecting these changing expectations, refinancing and the rate of mortgage
the yield on the 10-year U.S. Treasury A. As anticipated at the beginning of the prepayments slowed appreciably. That
note ranged from a low of 5.5% in January year, all bond market segments were off
to a high of 7.1% in June, before closing their 1995 returns. Mortgage-backed secu-
at 6.4% for the year.
Investment-grade bonds began to recover in
the fall when it became apparent
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
37
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
advantage diminished as interest rates Q. WHAT IS THE DIFFERENCE BETWEEN WEIGHTED Using duration, fund managers can
declined in the fall, and mortgage-backed AVERAGE MATURITY AND DURATION? manage the sensitivity of a
securities returned just 5.4% for the portfolio to changes in interest
year, according to Merrill Lynch's unman- A. They are very different. Unlike rates. A longer duration on a bond
aged index of the performance of mortgage- the weighted average maturity, which is or a portfolio, like a longer
backed securities. an average of the term to maturty re- maturity, indicates more sensitivity
maining on each of the Fund's bond to interest-rate changes because the
Q. WHAT OTHER STRATEGIES DID THE FUND holdings, duration is the average time investment is committed for a longer
USE TO STRENGTHEN ITS PERFORMANCE? it takes to receive the interest and period. During periods of rising
the principal on a bond. For example, if interest rates as noted during 1996,
A. The Fund continued to shorten its we compared two bonds of identical quality the Fund's managers may shorten the
weighted average maturity and duration and maturity, the two bonds could have the duration of the portfolio to reduce
to reduce its sensitivity to rising same weighted average maturity. However, the impact on the Fund's share
interest rates. As of December 31, 1996, the bond with the higher coupon would have values.
weighted average maturity was approxima- the lower duration because the investor
tely nine years and duration was about would collect all payments in a shorter Q. HOW WAS THE FUND POSITIONED AT
five years. average amount of time. THE END OF THE FISCAL YEAR?
A. As of December 31, 1996, the Fund
held 46% in mortgage-backed
securities, 15% in U.S. Treasury
obligations, and 31% in U.S. agency
obligations. The Fund's remaining
assets were invested in cash and
cash equivalent securities.
Of the mortgage segment holdings,
50% of the Fund was invested in
securities from Federal National
Mortgage Association, 42% in
Federal Home Loan Mortgage Corp.
securities, and 8% in securities of
Government National Mortgage
Association.
Q. WHAT IS YOUR OUTLOOK FOR THE
FIXED-INCOME MARKET IN 1997?
A. The pace of economic growth will
be the key to financial market
performance in 1997. At the close of
1996, economic growth appeared to
Growth of a $10,000 Investment have settled at an annual rate of
From 5/5/93 - 12/31/96 2.5%. in recent testimony before
Congress, Fed Chairman Alan
AIM V.I. Government Lehman Brothers Intermediate Greenspan said, "The economy has
Securities Fund Government Bond Index retained considerable vigor, with
(In thousands) few signs of the imbalances and
<S> <C> <C> inflationary tensions that have
5/5/93 $10,000 $10,000 disrupted past expansions."
7/30/93 10,180 10,138 The economy is growing at a
10/29/93 10,383 10,356 reasonable rate without rising
1/31/94 10,478 10,449 inflation, and that reduces the
4/29/94 9,939 10,089 likelihood that interest rates may
7/29/94 10,069 10,231 increase over the near term. Less
10/31/94 9,947 10,177 interest rate volatility generally
1/31/95 10,120 10,330 means less risk--a boost for fixed-
4/28/95 10,487 10,710 income securities. If this positive
7/31/95 10,870 11,089 environment can be sustained, the
10/31/95 11,219 11,397 results should be favorable for all
1/31/96 11,599 11,730 investors. Should economic
4/30/96 11,225 11,519 performance deviate from current
7/31/96 11,350 11,666 expectations, the Fund's diversified
10/31/96 11,713 12,024 approach to investing should perform
12/31/96 11,784 12,104 well even in more volatile times.
AVERAGE ANNUAL TOTAL RETURN Past performance cannot guarantee comparable
As of 12/31/96 future results.
1 Year 2.29%
Inception (5/5/93) 4.59
The performance figures shown represent the AIM V.I. Government Securities Fund
and are not intended to reflect actual annuity values, and do not reflect
charges at the separate account level which, if applied, would lower the
performance results. The Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in the net asset value. The Fund's
investment return and principal value will fluctuate so that Fund shares, when
redeemed, may be worth more or less than their original cost. Source: Towers
Data Systems HYPO.--Registered Trademark--
The Lehman Bros. Intermediate Government Bond Index is an unmanaged composite
generally considered representative of intermediate U.S. Treasury and U.S.
government agency securities. Results shown here are for the period 4/30/93
through 12/31/96. Source: Lehman Brothers.
An investment cannot be made in any index listed. Index results include
reinvested dividends.
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
38
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCIES - 78.95%
FEDERAL FARM CREDIT BANK - 0.79%
Medium term note
5.96%, 07/14/03 $ 200,000 $ 193,872
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK - 7.73%
Debentures
8.375%, 10/25/99 150,000 158,858
- ------------------------------------------------------------------------------
6.00%, 06/27/00 250,000 248,680
- ------------------------------------------------------------------------------
7.31%, 07/06/01 500,000 520,070
- ------------------------------------------------------------------------------
7.57%, 08/19/04 500,000 529,010
- ------------------------------------------------------------------------------
8.17%, 12/16/04 400,000 438,620
- ------------------------------------------------------------------------------
1,895,238
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. - 22.65%
Debentures
6.13%, 08/19/99 150,000 150,324
- ------------------------------------------------------------------------------
8.115%, 01/31/05 500,000 545,180
- ------------------------------------------------------------------------------
Pass through certificates
6.00%, 11/01/08 to 08/01/10 930,460 898,698
- ------------------------------------------------------------------------------
6.50%, 12/01/08 to 07/01/23 510,500 495,129
- ------------------------------------------------------------------------------
7.00%, 11/01/10 to 01/01/26 2,895,167 2,875,251
- ------------------------------------------------------------------------------
10.50%, 08/01/19 310,433 344,192
- ------------------------------------------------------------------------------
8.50%, 08/01/24 237,042 246,151
- ------------------------------------------------------------------------------
5,554,925
- ------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 35.23%
Debentures
7.55%, 04/22/02 400,000 419,744
- ------------------------------------------------------------------------------
8.50%, 02/01/05 500,000 526,270
- ------------------------------------------------------------------------------
Medium term notes
5.33%, 06/02/99 500,000 498,750
- ------------------------------------------------------------------------------
6.59%, 05/24/01 500,000 506,120
- ------------------------------------------------------------------------------
7.375%, 03/28/05 300,000 313,506
- ------------------------------------------------------------------------------
6.625%, 01/31/06 670,000 656,091
- ------------------------------------------------------------------------------
Pass through certificates
7.50%, 11/01/09 to 06/01/25 2,642,962 2,674,666
- ------------------------------------------------------------------------------
6.50%, 10/01/10 to 06/01/23 631,508 616,591
- ------------------------------------------------------------------------------
7.00%, 07/01/11 to 09/01/25 1,439,529 1,429,747
- ------------------------------------------------------------------------------
8.25%, 04/01/22 606,259 626,151
- ------------------------------------------------------------------------------
8.50%, 09/01/24 359,306 372,891
- ------------------------------------------------------------------------------
8,640,527
- ------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.95%
Pass through certificates
9.50%, 08/15/03 to 09/15/16 96,780 104,967
- ------------------------------------------------------------------------------
9.00%, 09/15/08 to 10/15/16 239,711 255,594
- ------------------------------------------------------------------------------
11.00%, 10/15/15 51,360 57,395
- ------------------------------------------------------------------------------
10.50%, 09/15/17 to 11/15/19 62,183 69,158
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - (CONTINUED)
6.50%, 12/15/23 $ 500,623 $ 480,753
- ------------------------------------------------------------------------------
967,867
- ------------------------------------------------------------------------------
PRIVATE EXPORT FUNDING COMPANY - 1.27%
Debentures
7.30%, 01/31/02 300,000 311,034
- ------------------------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION - 3.25%
Debentures
5.34%, 02/22/99 500,000 499,445
- ------------------------------------------------------------------------------
5.55%, 12/15/99 150,000 147,860
- ------------------------------------------------------------------------------
6.50%, 08/01/02 150,000 150,327
- ------------------------------------------------------------------------------
797,632
- ------------------------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY - 4.08%
Debentures
6.375%, 06/15/05 500,000 494,755
- ------------------------------------------------------------------------------
5.98%, 04/01/36 500,000 506,775
- ------------------------------------------------------------------------------
1,001,530
- ------------------------------------------------------------------------------
Total U.S. Government Agencies 19,362,625
- ------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 15.43%
U.S. TREASURY NOTES & BONDS - 15.20%
6.25%, 05/31/00 to 08/31/00 1,200,000 1,205,958
- ------------------------------------------------------------------------------
6.375%, 08/15/02 1,000,000 1,006,590
- ------------------------------------------------------------------------------
6.50%, 10/15/06 500,000 502,965
- ------------------------------------------------------------------------------
6.875%, 08/15/25 500,000 509,755
- ------------------------------------------------------------------------------
6.75%, 08/15/26 500,000 504,015
- ------------------------------------------------------------------------------
3,729,283
- ------------------------------------------------------------------------------
U.S. TREASURY STRIPS - 0.23%
6.80%(a), 11/15/18 250,000 56,090
- ------------------------------------------------------------------------------
Total U.S. Treasury Securities 3,785,373
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 7.12%(b)
Daiwa Securities America, Inc., 6.25%, 01/02/97(c) 1,746,103 1,746,103
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.50% 24,894,101
- ------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (1.50%) (367,585)
- ------------------------------------------------------------------------------
NET ASSETS - 100.00% $24,526,516
==============================================================================
</TABLE>
Notes to Schedule of Investments:
(a) U.S. Treasury STRIPS are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(b) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
39
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $24,885,471) $24,894,101
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 60,170
- ---------------------------------------------------------------------
Interest 265,368
- ---------------------------------------------------------------------
Investment for deferred compensation plan 11,447
- ---------------------------------------------------------------------
Organizational costs, net 3,870
- ---------------------------------------------------------------------
Other assets 6,103
- ---------------------------------------------------------------------
Total assets 25,241,059
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 676,507
- ---------------------------------------------------------------------
Deferred compensation 11,447
- ---------------------------------------------------------------------
Accrued advisory fees 10,422
- ---------------------------------------------------------------------
Accrued directors' fees 1,540
- ---------------------------------------------------------------------
Accrued administrative service fees 3,406
- ---------------------------------------------------------------------
Accrued operating expenses 11,221
- ---------------------------------------------------------------------
Total liabilities 714,543
- ---------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $24,526,516
=====================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 2,485,318
=====================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $9.87
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $1,443,467
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 107,471
- ----------------------------------------------------------------------------
Custodian fees 14,326
- ----------------------------------------------------------------------------
Administrative services fees 38,695
- ----------------------------------------------------------------------------
Directors' fees and expenses 6,373
- ----------------------------------------------------------------------------
Professional fees 17,682
- ----------------------------------------------------------------------------
Organizational costs 2,903
- ----------------------------------------------------------------------------
Other 9,163
- ----------------------------------------------------------------------------
Total expenses 196,613
- ----------------------------------------------------------------------------
Net investment income 1,246,854
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES:
Net realized gain (loss) on sales of investment securities (33,180)
- ----------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment securities (626,394)
- ----------------------------------------------------------------------------
Net gain (loss) on investment securities (659,574)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 587,280
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
40
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,246,854 $ 821,240
- ----------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities (33,180) (148,986)
- ----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities (626,394) 1,343,577
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 587,280 2,015,831
- ----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (1,251,057) (852,380)
- ----------------------------------------------------------------------------
Net equalization credits 247,547 199,339
- ----------------------------------------------------------------------------
Net increase from capital stock transactions 5,397,355 5,295,385
- ----------------------------------------------------------------------------
Net increase in net assets 4,981,125 6,658,175
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period $19,545,391 $12,887,216
- ----------------------------------------------------------------------------
End of period 24,526,516 19,545,391
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $24,348,661 $18,951,306
- ----------------------------------------------------------------------------
Undistributed net investment income 653,121 409,777
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (483,896) (450,716)
- ----------------------------------------------------------------------------
Unrealized appreciation of investment securities 8,630 635,024
- ----------------------------------------------------------------------------
$24,526,516 $19,545,391
============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Government Securities Fund (the "Fund"). The Fund's investment
objective is to achieve a high level of current income consistent with
reasonable concern for safety of principal by investing in debt securities
issued, guaranteed or otherwise backed by the U.S. Government. Currently,
shares of the Fund are sold only to insurance company separate accounts to
fund the benefits of variable annuity contracts and variable life insurance
policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - Debt obligations that are issued or guaranteed by the
U.S. Government, its agencies, authorities, and instrumentalities are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate, maturity and seasoning differential.
Securities for which market prices are not provided by the pricing service
are valued at the mean between last bid and asked prices based upon quotes
furnished by independent sources. Securities for which market quotations
are either not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Distributions to shareholders are recorded on the ex-dividend date.
Realized gains or losses from securities transactions are recorded on the
identified cost basis.
C. Federal Income Taxes - For federal income tax purposes, each portfolio in
the Company is taxed as a separate entity. It is the Fund's policy to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income and capital gains to its shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
The Fund had capital loss carryforwards (which may be carried forward to
offset future taxable capital gains, if any) of $387,410, which expires, if
not previously utilized, through the year 2004. The Fund cannot distribute
capital gains to shareholders until the tax loss carryforwards have been
utilized.
D. Equalization - The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and the costs of
repurchases of fund shares, equivalent on a per share basis to the amount
of undistributed net
AIM V.I. GOVERNMENT SECURITIES FUND
41
<PAGE>
investment income, is credited or charged to undistributed net income when
the transaction is recorded so that undistributed net investment income per
share is unaffected by sales or redemptions of fund shares.
E. Organizational Costs - Organizational costs for the Fund of $14,461 are
being amortized over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment
advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of
0.50% of the first $250 million of the Fund's average daily net assets, plus
0.45% of the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1996, AIM was reimbursed $38,695 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the
Fund's shares.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1996, the Fund incurred legal fees of
$2,168 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest a director's
fees, if so elected by such director, in mutual fund shares in accordance with
a deferred compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1996 was $12,203,533 and $6,469,084, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 198,397
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (189,767)
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment securities $ 8,630
===============================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold 872,793 $8,373,957 693,583 $6,660,171
- ------------------------- -------- ---------- -------- ----------
Issued as reinvestment of
distributions 126,754 1,220,637 85,675 852,380
- ------------------------- -------- ---------- -------- ----------
Reacquired (435,586) (4,197,239) (229,935) (2,217,166)
- ------------------------- -------- ---------- -------- ----------
563,961 $5,397,355 549,323 $5,295,385
======== ========== ======== ==========
</TABLE>
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, the eleven months ended December 31,
1995, the year ended January 31, 1995 and the period May 5, 1993 (date
operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------- -------------------
1996 1995 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 10.17 $ 9.39 $ 10.24 $ 10.00
- ---------------------------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.58 0.54 0.53 0.38
- ---------------------------- ------- ------- ------- -------
Net gains (losses) on
securities (both realized
and unrealized) (0.35) 0.74 (0.88) 0.10
- ---------------------------- ------- ------- ------- -------
Total from investment
operations 0.23 1.28 (0.35) 0.48
- ---------------------------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.53) (0.50) (0.50) (0.24)
- ---------------------------- ------- ------- ------- -------
Total distributions (0.53) (0.50) (0.50) (0.24)
- ---------------------------- ------- ------- ------- -------
Net asset value, end of
period $ 9.87 $ 10.17 $ 9.39 $ 10.24
- ---------------------------- ======= ======= ======= =======
Total return(a) 2.29% 13.84% (3.42)% 4.78%
- ---------------------------- ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $24,527 $19,545 $12,887 $10,643
- ---------------------------- ======= ======= ======= =======
Ratio of expenses to average
net assets 0.91%(b) 1.19%(c) 0.95%(d) 1.00%(c)(d)
- ---------------------------- ======= ======= ======= =======
Ratio of net investment
income to average net
assets 5.80%(b) 5.78%(c) 5.51%(e) 4.74%(c)(e)
- ---------------------------- ======= ======= ======= =======
Portfolio turnover rate 32% 41% 29% 0%
- ---------------------------- ======= ======= ======= =======
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $21,494,183.
(c) Annualized.
(d) Ratios of expenses to average net assets prior to waiver of advisory fees
and/or expense reimbursements are 1.10% and 1.80% (annualized) for
January, 1995 and 1994, respectively.
(e) Ratios of net investment income to average net assets prior to waiver of
advisory fees and/or expense reimbursements are 5.35% and 3.94%
(annualized) for January, 1995 and 1994, respectively.
NOTE 7 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. GOVERNMENT SECURITIES FUND
42
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Government Securities Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1996, the related statement of operations for the year then
ended, the statement of changes in net assets for the year then ended and the
eleven month period ended December 31, 1995 and the financial highlights for
the year then ended, the eleven month period ended December 31, 1995, the year
ended January 31, 1995, and the period May 5, 1993 (commencement of
operations) through January 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Government Securities Fund, as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and the eleven month period ended December 31, 1995 and the
financial highlights for the year then ended, the eleven month period ended
December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993
(commencement of operations) through January 31, 1994, in conformity with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. GOVERNMENT SECURITIES FUND
43
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
STOCK INVESTORS ARE
TREATED TO A STRONG 1996
A roundtable discussion with the Fund management team for
AIM V.I. Growth Fund for the fiscal year ended December 31, 1996.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. STOCKS DEFIED PREDICTIONS BY profits that seemed hard to match Top 10 Holdings
PRODUCING ANOTHER STRONG YEAR. a year later. That was particularly As of 12/31/96
HOW DID AIM V.I. GROWTH FUND PER- true for many technology companies,
FORM DURING THE REPORTING PERIOD? and many stocks in the technology sector 1. Student Loan Marketing Association
fell sharply in the fall of 1995 and the 2. Pep Boys-Manny, Moe & Jack
A. The bull market logged another summer of 1996. 3. Conseco, Inc.
year in its record longevity, but While later reports indicated the 4. Philip Morris Companies, Inc.
its strength was more thinly dis- economy had slowed to a moderate pace, 5. International Game Technology
tributed than in 1995 and large some analysts anticipated that higher 6. Federal Home Loan Mortgage
company stocks definitely held the interest rates remained a possibility. Association
field. Stocks of midsize companies 7. AccuStaff, Inc.
turned in decent performance, but Q. HOW DID INVESTORS REACT IN THAT 8. Loews Corp.
they lagged large company stocks ENVIRONMENT? 9. Gateway 2000, Inc.
for the year, as evidenced by the 10. St. Jude Medical, Inc.
19.20% total return posted for the A. Uncertainty creates volatile markets.
Standard & Poor's Midcap Index While stocks rose to record levels during Please keep in mind that the Fund's
compared to the 22.95% return for the year, circuit breakers on the New York portfolio composition is subject to
the Standard & Poor's Composite Stock Exchange, which temporarily suspend change and there is no assurance the
Index of 500 Stocks. trading to check volatility, were trig- Fund will continue to hold any
The Fund delivered a respectable gered a record 96 times. particular security.
total return of 18.09%, reflecting Given such dramatic fluctuation, in-
the trend for mid-cap company stocks. vestors gravitated to stocks in larger
Also in evidence was the impact of companies with more predictable earnings.
sharp declines in the technology As a result, large-company stocks generally software and networking companies.
sector, which suffered significant outperformed stocks of midsize companies The Fund also increased its
volatility in the summer of 1996. 1996. holdings in other sectors including
specialty retailers and medical ser-
Q. WHAT WERE THE FORCES BEHIND THE Q. HOW DID THESE FACTORS AFFECT THE vices providers.
ADVANCE IN EQUITY MARKETS? FUND?
Q. WHAT'S THE OUTLOOK FOR THE
A. Stocks delivered another record- A. The Fund was affected by the per- TECHNOLOGY SECTOR?
breaking performance thanks to robust formance of small-and mid-cap stocks
corporate profits and the favorable as well as stocks in the techonlogy A. We noted a number of positive
environment of healthy economic growth sector. Due to its larger concentration factors that bode well for selected
without rising inflation. However, the in technology stocks, the Fund was technology areas where the Fund is
charging advance was interrupted several vulnerable when that sector suffered invested. Technol-
times during the year when economic a broad-based decline in the summer.
reports suggested that surprisingly
strong growth might rock the boat Q. WHAT STRATEGIES DID THE FUND USE
and send interest rates higher. TO STRENGTHEN ITS PERFORMANCE?
Higher interest rates increase
borrowing and operating costs, and A. The Fund stressed a more broadly
that can have a strong impact on diversified portfolio. The technology
corporate profits, particularly for weighting was pared to approximately
smaller companies. In 1995, many 23% by the end of the reporting period,
companies had posted stunning and the Fund repositioned its emphasis
from semiconductor producers to computer
</TABLE>
AIM V.I. GROWTH FUND
44
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ogy giants Microsoft Corp. and Intel Q. HOW WAS THE FUND POSITIONED AT tion has begun to drive out many of
continue as market leaders thanks to THE END OF THE FISCAL YEAR? the smaller, less experienced players,
their ability to generate strong pro- particularly in the physician practice
fit growth. Microsoft's Windows NT A. The Fund held a large number of stocks-- management area. The Fund focused on
and Intel's Pentium Pro chip have the 220 as of December 31, 1996, spread over three major areas in the health-care
potential to launch another major up- 53 industry categories. The largest segment where there appears to be
grade cycle in spring 1997 that will position weighting in the Fund was 1.83%. attractive potential for earnings
benefit PC makers and software de- The Fund's largest concentrations were growth: preventive maintenance,
velopers alike. PC makers Compaq 23% in technology, followed by 16% in assisted living, and hospital systems
Computer Corp. and Dell Computer medical products and services, and 6% administration.
Corp. benefit from the decline in in retail and consumer cyclicals. Among the Fund's strongest per-
prices of semiconductors and other formers were such market leaders as
components. Computer networking com- Q. WHAT DO YOU SEE AS THE MAIN THEMES medical instruments and products maker
panies like 3Com Corp. have been IN THE HEALTH-CARE INDUSTRY? St. Jude Medical, Inc., patient ser-
consistently strong during the period vices provider HealthSouth Corp.,
as companies continue to upgrade data A. Consolidation efforts continue in the and drugmaker Johnson & Johnson.
communication capacity. health-care industry, and intense competi-
Q. THE FUND HAD A SIGNIFICANT
GROWTH OF A $10,000 INVESTMENT WEIGHTING IN STOCKS OF RETAIL AND
From 5/5/93 - 12/31/96 CONSUMER NON-CYCLICAL COMPANIES,
AIM V.I. GROWTH S&P 500 PARTICULARLY RETAIL STORES. WHAT
FUND STOCK INDEX ATTRACTED YOU THERE?
(In thousands)
5/5/93 $10,000 $10,000 A. Earnings in the retail sector have
7/30/93 10,420 10,155 been surprisingly strong, and they
10/29/93 11,160 10,675 continue to grow at an attractive
1/31/94 11,607 11,062 pace. Consumer demand for goods has
4/29/94 10,626 10,430 kept store inventories low and fully
7/29/94 10,425 10,681 priced. The Fund emphasized holdings
10/31/94 10,207 11,088 in stronger, name-brand stores:
1/31/95 10,782 11,123 Safeway Inc., Staples Inc., Con-
4/28/95 12,060 12,247 solidated Stores Corp., and Dayton
7/31/95 14,094 13,462 Hudson Corp.
10/31/95 14,436 14,011
1/31/96 14,806 15,412 Q. WHAT IS YOUR OUTLOOK FOR THE
4/30/96 15,712 15,937 MARKET IN 1997?
7/31/96 14,887 15,678
10/31/96 16,639 17,376 A. Conditions appear favorable for
12/31/96 17,175 18,344 stocks over the near term, thanks to
a positive economic climate. The
Past performance cannot guarantee comparable economy is growing at a reasonable
AVERAGE ANNUAL TOTAL RETURN future results. rate without rising inflation, and
As of 12/31/96 that reduces the likelihood that in-
1 Year 18.09% terest rates may increase over the
Inception (5/5/93) 15.94 near term.
The pace of growth in corporate
earnings will be the key to market
The performance figures shown represent the AIM V.I. Growth Fund and are not intended performance in 1997. Through most
to reflect actual annuity values, and do not reflect charges at the separate account of the 1990s, corporate earnings
level which, if applied, would lower the performance results. The Fund's performance growth has been above historic
figures are historical and reflect reinvestment of all distributions and changes in the averages. As economic growth con-
net asset value. The Fund's investment return and principal value will fluctuate so tinues at a slower pace, it is likely
that Fund shares, when redeemed, may be worth more or less than their original cost. that corporate earnings will slow to
Source: Towers Data Systems HYPO. --Registered Trademark-- a more moderate rate, which may
The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of unmanaged translate into more conservative
securities widely regarded by investors to be representative of the stock market in performance for stocks.
general. Source: Towers Data Systems HYPO. --Registered Trademark--
An investment cannot be made in any index listed. Index results include
reinvested dividends.
</TABLE>
AIM V.I. GROWTH FUND
45
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 86.06%
ADVERTISING/BROADCASTING - 0.48%
Interpublic Group of Cos., Inc. 18,000 $ 855,000
- -----------------------------------------------------------------
AEROSPACE/DEFENSE - 0.77%
Gulfstream Aerospace Corp.(a) 27,000 654,750
- -----------------------------------------------------------------
United Technologies Corp. 11,000 726,000
- -----------------------------------------------------------------
1,380,750
- -----------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS) - 0.46%
Chrysler Corp. 25,000 825,000
- -----------------------------------------------------------------
BANKING (MONEY CENTER) - 0.43%
Citicorp 7,500 772,500
- -----------------------------------------------------------------
BEVERAGES (SOFT DRINKS) - 0.37%
PepsiCo, Inc. 22,500 658,125
- -----------------------------------------------------------------
BIOTECHNOLOGY - 1.06%
AMGEN Inc.(a) 6,000 326,250
- -----------------------------------------------------------------
Biogen, Inc.(a) 20,000 775,000
- -----------------------------------------------------------------
Guidant Corp. 14,000 798,000
- -----------------------------------------------------------------
1,899,250
- -----------------------------------------------------------------
BUSINESS SERVICES - 2.92%
AccuStaff, Inc.(a) 78,600 1,660,425
- -----------------------------------------------------------------
Cognizant Corp.(a) 45,000 1,485,000
- -----------------------------------------------------------------
CUC International, Inc.(a) 16,500 391,875
- -----------------------------------------------------------------
Diebold, Inc. 11,700 735,638
- -----------------------------------------------------------------
Equifax, Inc. 23,200 710,500
- -----------------------------------------------------------------
Olsten Corp. 15,900 240,488
- -----------------------------------------------------------------
5,223,926
- -----------------------------------------------------------------
CHEMICALS - 0.25%
Monsanto Co. 11,700 454,838
- -----------------------------------------------------------------
COMPUTER MAINFRAMES - 0.85%
International Business Machines Corp. 10,000 1,510,000
- -----------------------------------------------------------------
COMPUTER MINI/PCS - 3.85%
Apple Computer, Inc.(a) 30,000 626,250
- -----------------------------------------------------------------
COMPAQ Computer Corp.(a) 18,000 1,336,500
- -----------------------------------------------------------------
Dell Computer Corp.(a) 24,200 1,285,625
- -----------------------------------------------------------------
Gateway 2000, Inc.(a) 29,700 1,590,806
- -----------------------------------------------------------------
Hewlett-Packard Co. 18,000 904,500
- -----------------------------------------------------------------
Sun Microsystems, Inc.(a) 44,000 1,130,250
- -----------------------------------------------------------------
6,873,931
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
COMPUTER NETWORKING - 3.10%
Cabletron Systems, Inc.(a) 18,900 $ 628,425
- ------------------------------------------------------------------
Cascade Communications Corp.(a) 25,000 1,378,125
- ------------------------------------------------------------------
Cisco Systems, Inc.(a) 23,000 1,463,375
- ------------------------------------------------------------------
FORE Systems, Inc.(a) 18,000 591,750
- ------------------------------------------------------------------
3Com Corp.(a) 20,000 1,467,500
- ------------------------------------------------------------------
5,529,175
- ------------------------------------------------------------------
COMPUTER PERIPHERALS - 0.90%
EMC Corp.(a) 21,000 695,625
- ------------------------------------------------------------------
Storage Technology Corp.(a) 19,300 919,163
- ------------------------------------------------------------------
1,614,788
- ------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 7.76%
BMC Software, Inc.(a) 31,000 1,282,625
- ------------------------------------------------------------------
Cadence Design Systems, Inc.(a) 27,700 1,101,075
- ------------------------------------------------------------------
Ceridian Corp.(a) 30,540 1,236,870
- ------------------------------------------------------------------
Computer Associates International, Inc. 21,900 1,089,525
- ------------------------------------------------------------------
CompuWare Corp.(a) 21,000 1,052,625
- ------------------------------------------------------------------
Electronic Arts, Inc.(a) 20,000 598,750
- ------------------------------------------------------------------
Electronic Data Systems Corp. 13,000 562,250
- ------------------------------------------------------------------
Fiserv, Inc.(a) 25,000 918,750
- ------------------------------------------------------------------
HBO & Co. 25,000 1,484,375
- ------------------------------------------------------------------
Microsoft Corp.(a) 8,500 702,313
- ------------------------------------------------------------------
Oracle Corp.(a) 12,750 532,312
- ------------------------------------------------------------------
Parametric Technology Co.(a) 8,700 446,963
- ------------------------------------------------------------------
Sterling Commerce, Inc.(a) 25,000 881,250
- ------------------------------------------------------------------
Synopsys, Inc.(a) 10,400 481,000
- ------------------------------------------------------------------
Wallace Computer Services, Inc. 43,000 1,483,500
- ------------------------------------------------------------------
13,854,183
- ------------------------------------------------------------------
CONGLOMERATES - 2.73%
Allied Signal Inc. 10,200 683,400
- ------------------------------------------------------------------
Du Pont (E.I.) de Nemours & Co. 8,000 755,000
- ------------------------------------------------------------------
Loews Corp. 17,200 1,621,100
- ------------------------------------------------------------------
Tyco International Ltd. 26,800 1,417,050
- ------------------------------------------------------------------
U.S. Industries Inc.(a) 11,900 409,063
- ------------------------------------------------------------------
4,885,613
- ------------------------------------------------------------------
CONTAINERS - 0.28%
Sealed Air Corp.(a) 12,000 499,500
- ------------------------------------------------------------------
COSMETICS & TOILETRIES - 0.84%
Warner-Lambert Co. 20,000 1,500,000
- ------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
46
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONIC COMPONENTS/MISCELLANEOUS - 1.89%
Checkpoint Systems, Inc.(a) 54,700 $ 1,353,825
- -------------------------------------------------------------------
Symbol Technologies, Inc.(a) 16,000 708,000
- -------------------------------------------------------------------
Thermo Instrument Systems, Inc.(a) 17,900 592,938
- -------------------------------------------------------------------
Waters Corp.(a) 23,500 713,813
- -------------------------------------------------------------------
3,368,576
- -------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 1.16%
Bear Stearns Cos., Inc. 9,900 275,962
- -------------------------------------------------------------------
Franklin Resources, Inc. 8,500 581,187
- -------------------------------------------------------------------
Schwab (Charles) Corp. 16,300 521,600
- -------------------------------------------------------------------
T. Rowe Price Associates 16,100 700,350
- -------------------------------------------------------------------
2,079,099
- -------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 5.27%
Federal Home Loan Mortgage Corp. 15,600 1,717,950
- -------------------------------------------------------------------
Federal National Mortgage Association 24,000 894,000
- -------------------------------------------------------------------
Finova Group, Inc. 6,500 417,625
- -------------------------------------------------------------------
Green Tree Financial Corp. 19,400 749,325
- -------------------------------------------------------------------
Household International, Inc. 5,500 507,375
- -------------------------------------------------------------------
Money Store, Inc. (The) 10,500 290,062
- -------------------------------------------------------------------
PMI Group, Inc. (The) 21,600 1,196,100
- -------------------------------------------------------------------
Student Loan Marketing Association 34,000 3,166,250
- -------------------------------------------------------------------
SunAmerica, Inc. 10,800 479,250
- -------------------------------------------------------------------
9,417,937
- -------------------------------------------------------------------
FINANCE (SAVINGS & LOAN) - 0.91%
Ahmanson (H.F.) & Co. 25,000 812,500
- -------------------------------------------------------------------
ContiFinancial Corp.(a) 4,800 173,400
- -------------------------------------------------------------------
Great Western Financial Corp. 22,000 638,000
- -------------------------------------------------------------------
1,623,900
- -------------------------------------------------------------------
FOOD/PROCESSING - 0.96%
ConAgra, Inc. 13,500 671,625
- -------------------------------------------------------------------
Dean Foods Co. 24,000 774,000
- -------------------------------------------------------------------
Lancaster Colony Corp. 5,966 274,436
- -------------------------------------------------------------------
1,720,061
- -------------------------------------------------------------------
FUNERAL SERVICES - 0.62%
Service Corp. International 39,800 1,114,400
- -------------------------------------------------------------------
GAMING - 1.02%
International Game Technology 100,000 1,825,000
- -------------------------------------------------------------------
HOME BUILDING - 0.08%
Champion Enterprises, Inc.(a) 7,200 140,400
- -------------------------------------------------------------------
HOTELS/MOTELS - 1.41%
HFS, Inc.(a) 12,500 746,875
- -------------------------------------------------------------------
Hilton Hotels Corp. 22,000 574,750
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOTELS/MOTELS-(CONTINUED)
Host Marriott Corp.(a) 55,600 $ 889,600
- -------------------------------------------------------------------
Marriott International, Inc. 5,500 303,875
- -------------------------------------------------------------------
2,515,100
- -------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 1.24%
Conseco Inc. 33,500 2,135,625
- -------------------------------------------------------------------
Provident Companies, Inc. 1,600 77,400
- -------------------------------------------------------------------
2,213,025
- -------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 3.90%
Allstate Corp. 19,900 1,151,713
- -------------------------------------------------------------------
American International Group, Inc. 6,500 703,625
- -------------------------------------------------------------------
Chubb Corp. 9,800 526,750
- -------------------------------------------------------------------
CIGNA Corp. 6,500 888,062
- -------------------------------------------------------------------
Everest Re Holdings, Inc. 24,400 701,500
- -------------------------------------------------------------------
ITT Hartford Group, Inc. 7,000 472,500
- -------------------------------------------------------------------
MGIC Investment Corp. 9,400 714,400
- -------------------------------------------------------------------
Old Republic International Corp. 11,300 302,275
- -------------------------------------------------------------------
Travelers Group, Inc. 33,000 1,497,375
- -------------------------------------------------------------------
6,958,200
- -------------------------------------------------------------------
LEISURE & RECREATION - 0.85%
Carnival Corp. - Class A 22,000 726,000
- -------------------------------------------------------------------
Coleman Co., Inc.(a) 6,200 85,250
- -------------------------------------------------------------------
Harley-Davidson, Inc. 15,000 705,000
- -------------------------------------------------------------------
1,516,250
- -------------------------------------------------------------------
MACHINERY (HEAVY) - 0.42%
Caterpillar Inc. 10,000 752,500
- -------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 0.88%
Thermo Electron Corp.(a) 38,000 1,567,500
- -------------------------------------------------------------------
MEDICAL (DRUGS) - 5.94%
Abbott Laboratories 16,000 812,000
- -------------------------------------------------------------------
American Home Products Corp. 13,000 762,125
- -------------------------------------------------------------------
AmeriSource Health Corp.(a) 15,000 723,750
- -------------------------------------------------------------------
Bristol-Myers Squibb Co. 9,000 978,750
- -------------------------------------------------------------------
Cardinal Health, Inc. 9,000 524,250
- -------------------------------------------------------------------
Express Scripts, Inc. - Class A(a) 1,400 50,225
- -------------------------------------------------------------------
ICN Pharmaceuticals, Inc. 29,000 569,125
- -------------------------------------------------------------------
Johnson & Johnson 23,200 1,154,200
- -------------------------------------------------------------------
Lilly (Eli) & Co. 7,900 576,700
- -------------------------------------------------------------------
Merck & Co., Inc. 12,000 951,000
- -------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 14,000 554,750
- -------------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 19,500 1,523,438
- -------------------------------------------------------------------
Schering-Plough Corp. 9,700 628,075
- -------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 17,800 799,888
- -------------------------------------------------------------------
10,608,276
- -------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
47
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
MEDICAL (INSTRUMENTS/PRODUCTS) - 3.53%
Baxter International Inc. 15,700 $ 643,700
- -------------------------------------------------------------------
Becton, Dickinson & Co. 17,000 737,375
- -------------------------------------------------------------------
Boston Scientific Corp.(a) 8,770 526,200
- -------------------------------------------------------------------
Medtronic, Inc. 10,000 680,000
- -------------------------------------------------------------------
St. Jude Medical, Inc.(a) 37,000 1,577,125
- -------------------------------------------------------------------
Stryker Corp.(a) 25,000 746,875
- -------------------------------------------------------------------
Sybron International Corp.(a) 29,000 957,000
- -------------------------------------------------------------------
U.S. Surgical Corp. 11,100 437,062
- -------------------------------------------------------------------
6,305,337
- -------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 3.70%
Columbia\HCA Healthcare Corp. 27,000 1,100,250
- -------------------------------------------------------------------
Health Care & Retirement Corp.(a) 6,700 191,788
- -------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 35,500 1,371,188
- -------------------------------------------------------------------
MedPartners, Inc.(a) 57,880 1,215,480
- -------------------------------------------------------------------
Oxford Health Plans, Inc.(a) 8,500 497,781
- -------------------------------------------------------------------
Quorum Health Group, Inc.(a) 36,500 1,085,875
- -------------------------------------------------------------------
Tenet Healthcare Corp.(a) 33,000 721,875
- -------------------------------------------------------------------
United Healthcare Corp.(a) 9,400 423,000
- -------------------------------------------------------------------
6,607,237
- -------------------------------------------------------------------
NATURAL GAS PIPELINE - 0.37%
Columbia Gas System, Inc. 10,500 668,063
- -------------------------------------------------------------------
OFFICE AUTOMATION - 0.32%
Xerox Corp. 11,000 578,875
- -------------------------------------------------------------------
OFFICE PRODUCTS - 0.76%
Avery Dennison Corp. 10,000 353,750
- -------------------------------------------------------------------
Ingram Micro, Inc. - Class A(a) 28,000 644,000
- -------------------------------------------------------------------
Reynolds & Reynolds Co. - Class A 14,000 364,000
- -------------------------------------------------------------------
1,361,750
- -------------------------------------------------------------------
OIL & GAS (DRILLING) - 0.33%
Reading & Bates Corp.(a) 22,000 583,000
- -------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.03%
Transocean Offshore Inc. 900 56,362
- -------------------------------------------------------------------
OIL & GAS (SERVICES) - 0.67%
Halliburton Co. 6,000 361,500
- -------------------------------------------------------------------
Louisiana Land & Exploration Co. 10,100 541,613
- -------------------------------------------------------------------
NorAm Energy Corp. 19,300 296,738
- -------------------------------------------------------------------
1,199,851
- -------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES - 1.87%
Baker Hughes, Inc. 17,000 586,500
- -------------------------------------------------------------------
BJ Services Co.(a) 5,400 275,400
- -------------------------------------------------------------------
Cooper Cameron Corp.(a) 2,800 214,200
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES-(CONTINUED)
Dresser Industries, Inc. 12,500 $ 387,500
- -------------------------------------------------------------------
Rowan Companies, Inc.(a) 34,000 769,250
- -------------------------------------------------------------------
Schlumberger Ltd. 5,500 549,312
- -------------------------------------------------------------------
Tidewater, Inc. 12,500 565,625
- -------------------------------------------------------------------
3,347,787
- -------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.37%
Kimberly-Clark Corp. 7,000 666,750
- -------------------------------------------------------------------
PUBLISHING - 0.45%
New York Times Co. - Class A 17,000 646,000
- -------------------------------------------------------------------
Times Mirror Co. (The) - Class A 3,000 149,250
- -------------------------------------------------------------------
795,250
- -------------------------------------------------------------------
RESTAURANTS - 0.57%
Applebee's International, Inc. 37,000 1,017,500
- -------------------------------------------------------------------
RETAIL (FOOD & DRUGS) - 1.35%
American Stores Co. 17,000 694,875
- -------------------------------------------------------------------
Kroger Co. (The)(a) 3,700 172,050
- -------------------------------------------------------------------
Safeway, Inc.(a) 36,000 1,539,000
- -------------------------------------------------------------------
2,405,925
- -------------------------------------------------------------------
RETAIL (STORES) - 5.94%
Consolidated Stores Corp.(a) 25,000 803,125
- -------------------------------------------------------------------
Dayton Hudson Corp. 24,500 961,625
- -------------------------------------------------------------------
Gap, Inc. (The) 23,000 692,875
- -------------------------------------------------------------------
Home Depot, Inc. 17,000 852,125
- -------------------------------------------------------------------
Lowe's Companies, Inc. 35,000 1,242,500
- -------------------------------------------------------------------
Micro Warehouse, Inc.(a) 1,100 12,925
- -------------------------------------------------------------------
Pep Boys - Manny, Moe & Jack 72,800 2,238,600
- -------------------------------------------------------------------
Staples, Inc.(a) 52,075 940,605
- -------------------------------------------------------------------
Sysco Corp. 21,000 685,125
- -------------------------------------------------------------------
Tech Data Corp.(a) 1,300 35,587
- -------------------------------------------------------------------
Toys "R" Us, Inc.(a) 42,000 1,260,000
- -------------------------------------------------------------------
U.S. Office Products Co. (a) 25,000 853,125
- -------------------------------------------------------------------
Viking Office Products, Inc.(a) 1,400 37,362
- -------------------------------------------------------------------
10,615,579
- -------------------------------------------------------------------
SEMICONDUCTORS - 3.65%
Advanced Micro Devices, Inc.(a) 7,000 180,250
- -------------------------------------------------------------------
Altera Corp.(a) 12,000 872,250
- -------------------------------------------------------------------
Applied Materials, Inc.(a) 38,000 1,365,625
- -------------------------------------------------------------------
Intel Corp. 11,500 1,505,781
- -------------------------------------------------------------------
KLA Instruments Corp.(a) 20,000 710,000
- -------------------------------------------------------------------
Micron Technology, Inc. 20,000 582,500
- -------------------------------------------------------------------
National Semiconductor Corp.(a) 27,000 658,125
- -------------------------------------------------------------------
Texas Instruments, Inc. 10,000 637,500
- -------------------------------------------------------------------
6,512,031
- -------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
48
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
SHOES & RELATED APPAREL - 0.39%
Nike, Inc. - Class B 11,700 $ 699,075
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.81%
ADC Telecommunications, Inc.(a) 30,600 952,425
- -----------------------------------------------------------------------------
Andrew Corp.(a) 12,000 636,750
- -----------------------------------------------------------------------------
Frontier Corp. 12,000 271,500
- -----------------------------------------------------------------------------
Lucent Technologies, Inc. 20,000 925,000
- -----------------------------------------------------------------------------
MFS Communications Co., Inc.(a) 14,000 763,000
- -----------------------------------------------------------------------------
PairGain Technologies, Inc.(a) 16,000 487,000
- -----------------------------------------------------------------------------
Tellabs, Inc.(a) 34,000 1,279,250
- -----------------------------------------------------------------------------
360 Communications Co.(a) 27,500 635,937
- -----------------------------------------------------------------------------
WorldCom, Inc.(a) 33,000 860,062
- -----------------------------------------------------------------------------
6,810,924
- -----------------------------------------------------------------------------
TELEPHONE - 0.38%
Cincinnati Bell, Inc. 11,000 677,875
- -----------------------------------------------------------------------------
TEXTILES - 0.71%
Fruit of The Loom, Inc. - Class A(a) 20,000 757,500
- -----------------------------------------------------------------------------
Liz Claiborne, Inc. 13,000 502,125
- -----------------------------------------------------------------------------
1,259,625
- -----------------------------------------------------------------------------
TOBACCO - 3.26%
Philip Morris Companies, Inc. 18,000 2,027,250
- -----------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 45,000 1,530,000
- -----------------------------------------------------------------------------
Universal Corp. 25,000 803,125
- -----------------------------------------------------------------------------
UST, Inc. 45,000 1,456,875
- -----------------------------------------------------------------------------
5,817,250
- -----------------------------------------------------------------------------
Total Domestic Common Stocks 153,742,849
- -----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC CONVERTIBLE CORPORATE BONDS - 1.74%
ELECTRONIC COMPONENTS/MISCELLANEOUS - 0.80%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%,
05/01/06(b) (Acquired 10/31/96 - 12/06/96; Cost
$1,564,664) $1,223,000 1,428,305
- -----------------------------------------------------------------------------
RESTAURANTS - 0.44%
Boston Chicken, Inc., Conv. Liquid Yield Option
Notes, 8.00%, 06/01/15(c) 2,436,000 774,745
- -----------------------------------------------------------------------------
SEMICONDUCTORS - 0.50%
Cypress Semiconductor Corp., Conv. Sub. Notes,
3.15%, 03/15/01 800,000 899,712
- -----------------------------------------------------------------------------
Total Domestic Convertible Corporate Bonds 3,102,762
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 7.25%
CANADA - 1.06%
Canadian Pacific, Ltd. (Transportation -
Miscellaneous) 21,000 $ 556,500
- ----------------------------------------------------------------------------
Newbridge Networks Corp. (Computer Networking) (a) 21,000 593,250
- ----------------------------------------------------------------------------
Northern Telecom Ltd. (Telecommunications) 12,000 742,500
- ----------------------------------------------------------------------------
1,892,250
- ----------------------------------------------------------------------------
FINLAND - 0.74%
Nokia Oy A.B. - Class A (Telecommunications) 7,350 426,620
- ----------------------------------------------------------------------------
Nokia Oy A.B. - Class A - ADR (Telecommunications) 15,650 901,830
- ----------------------------------------------------------------------------
1,328,450
- ----------------------------------------------------------------------------
FRANCE - 0.26%
Roussel-Uclaf (Medical - Drugs) 1,600 470,888
- ----------------------------------------------------------------------------
IRELAND - 0.33%
Elan Corp. PLC-ADR (Medical - Drugs)(a) 17,500 581,875
- ----------------------------------------------------------------------------
ISRAEL - 0.65%
ECI Telecommunications Ltd. Designs (Computer
Networking) 14,100 299,625
- ----------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR (Medical -
Drugs) 17,100 859,275
- ----------------------------------------------------------------------------
1,158,900
- ----------------------------------------------------------------------------
ITALY - 0.32%
Fila Holding S.p.A.-ADR (Retail - Stores) 10,000 581,250
- ----------------------------------------------------------------------------
JAPAN - 1.29%
Canon, Inc. (Office Automation) 29,000 641,050
- ----------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobile - Manufacturers) 15,000 428,719
- ----------------------------------------------------------------------------
Sony Corp. (Electronic Components/Miscellaneous) 9,000 589,845
- ----------------------------------------------------------------------------
TDK Corp. (Electronic Components/Miscellaneous) 10,000 651,930
- ----------------------------------------------------------------------------
2,311,544
- ----------------------------------------------------------------------------
NETHERLANDS - 0.72%
Gucci Group N.V.-ADR (Textiles) 8,000 511,000
- ----------------------------------------------------------------------------
Royal Dutch Petroleum Co. (Oil & Gas - Services) 4,500 768,375
- ----------------------------------------------------------------------------
1,279,375
- ----------------------------------------------------------------------------
SWEDEN - 0.78%
Telefonaktiebolaget LM Ericsson-ADR
(Telecommunications) 46,000 1,388,625
- ----------------------------------------------------------------------------
UNITED KINGDOM - 1.10%
Danka Business Systems PLC-ADR (Office Automation) 17,000 601,375
- ----------------------------------------------------------------------------
SmithKline Beecham PLC-ADR (Medical - Drugs) 20,000 1,360,000
- ----------------------------------------------------------------------------
1,961,375
- ----------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 12,954,532
- ----------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
49
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET
VALUE
<S> <C> <C>
FOREIGN CONVERTIBLE BONDS - 0.33%
SWITZERLAND - 0.33%
Sandoz Capital BVI Ltd., Sr. Conv. Deb., 2.00%,
10/06/02(b) (Acquired 11/04/96 - 11/08/96; Cost
$612,612) $ 550,000 $ 591,250
- --------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 3.51%
U.S. Treasury Bills - 3.51%(d)
4.72%, 02/06/97 250,000 248,865
- --------------------------------------------------------------------------
4.84%, 02/06/97 140,000 139,364
- --------------------------------------------------------------------------
4.945%, 03/27/97(e) 5,941,000 5,873,629
- --------------------------------------------------------------------------
Total U.S. Treasury Securities 6,261,858
- --------------------------------------------------------------------------
REPURCHASE AGREEMENT - 1.03%(f)
Daiwa Securities America, Inc., 6.25%, 01/02/97(g) 1,834,472 1,834,472
- --------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.92% 178,487,723
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.08% 150,169
- --------------------------------------------------------------------------
NET ASSETS - 100.00% $178,637,892
==========================================================================
</TABLE>
Investment Abbreviations:
ADR - American Depository Receipt
Conv.- Convertible
Deb. - Debentures
Sr. - Senior
Sub. - Subordinated
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at December 31, 1996 was
$2,019,555 which represented 1.13% of the Fund's net assets.
(c) Zero coupon bond. The interest rate represents the rate of original issue
discount.
(d) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(e) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 7.
(f) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(g) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $154,626,844) $178,487,723
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 423,787
- ----------------------------------------------------------------------
Investments sold 1,210,059
- ----------------------------------------------------------------------
Dividends and interest 162,853
- ----------------------------------------------------------------------
Organizational costs, net 4,260
- ----------------------------------------------------------------------
Investment for deferred compensation plan 12,007
- ----------------------------------------------------------------------
Other assets 195
- ----------------------------------------------------------------------
Total assets 180,300,884
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,079,108
- ----------------------------------------------------------------------
Deferred compensation plan 12,007
- ----------------------------------------------------------------------
Options written 307,025
- ----------------------------------------------------------------------
Variation margin 124,100
- ----------------------------------------------------------------------
Accrued advisory fees 98,239
- ----------------------------------------------------------------------
Accrued directors' fees 1,767
- ----------------------------------------------------------------------
Accrued administrative services fees 3,586
- ----------------------------------------------------------------------
Accrued operating expenses 37,160
- ----------------------------------------------------------------------
Total liabilities 1,662,992
- ----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $178,637,892
======================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 10,990,000
- ----------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $16.25
======================================================================
</TABLE>
AIM V.I. GROWTH FUND
50
<PAGE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $12,190 foreign withholding tax) $ 1,366,576
- -----------------------------------------------------------------------------
Interest 851,189
- -----------------------------------------------------------------------------
Total investment income 2,217,765
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 916,484
- -----------------------------------------------------------------------------
Custodian fees 84,078
- -----------------------------------------------------------------------------
Administrative services fees 39,552
- -----------------------------------------------------------------------------
Directors' fees and expenses 6,833
- -----------------------------------------------------------------------------
Organizational costs 2,892
- -----------------------------------------------------------------------------
Other 54,154
- -----------------------------------------------------------------------------
Total expenses 1,103,993
- -----------------------------------------------------------------------------
Net investment income 1,113,772
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FUTURES AND OPTIONS CONTRACTS:
NET REALIZED GAIN FROM:
Investment securities 6,639,709
- -----------------------------------------------------------------------------
Foreign currency transactions 10,228
- -----------------------------------------------------------------------------
Futures contracts 1,680,864
- -----------------------------------------------------------------------------
Options contracts 31,908
- -----------------------------------------------------------------------------
8,362,709
- -----------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities 13,734,605
- -----------------------------------------------------------------------------
Foreign currencies (4,595)
- -----------------------------------------------------------------------------
Futures contracts (70,532)
- -----------------------------------------------------------------------------
Options contracts 35,948
- -----------------------------------------------------------------------------
13,695,426
- -----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, futures
and options contracts 22,058,135
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $23,171,907
=============================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,113,772 $ 637,435
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currency transactions, futures and
options contracts 8,362,709 9,511,105
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, futures and
options contracts 13,695,426 8,357,905
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 23,171,907 18,506,445
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (662,515) (48,608)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (7,442,940) --
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 60,971,328 38,645,259
- ------------------------------------------------------------------------------
Net increase in net assets 76,037,780 57,103,096
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 102,600,112 45,497,016
- ------------------------------------------------------------------------------
End of period $178,637,892 $102,600,112
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $145,591,115 $ 84,619,787
- ------------------------------------------------------------------------------
Undistributed net investment income 1,090,173 628,628
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currency transactions,
futures and options contracts 7,976,691 7,067,210
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and options
contracts 23,979,913 10,284,487
- ------------------------------------------------------------------------------
$178,637,892 $102,600,112
==============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Growth Fund (the "Fund"). The Fund's investment objective is
to seek growth of capital principally through investment in common stocks of
seasoned and better capitalized companies considered by AIM to have strong
earnings momentum. Currently, shares of the Fund are sold only to insurance
company separate accounts to fund the benefits of variable annuity contracts
and variable life insurance policies.
The following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date, or absent a last sales price, at the mean of
the closing bid and asked prices. Debt obligations are valued on the basis
of prices provided by an independent pricing service. Prices provided by
the pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. If no mean is available, as is the case in
some foreign market, the closing bid will be used absent a last sales
price. Short-term investments with remaining maturities of up to and
including 60 days are valued at amortized cost which approximates market
value. Short-term securities that mature in more than 60 days are valued at
current market quotations. Securities for which market quotations either
are not readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors.
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York
Stock Exchange. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which will
not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis. On December 31, 1996,
undistributed net investment income was increased by $10,288 and
undistributed net realized gains reduced by $10,288 in order to comply with
the requirements of the American Institute of Certified Public Accountants.
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Organizational Costs - Organizational costs of $14,461 are being amortized
over five years.
E. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
F. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal
AIM V.I. GROWTH FUND
52
<PAGE>
to the premium received by the Fund is recorded as an asset and an equivalent
liability. The amount of the liability is subsequently "marked-to-market" to
reflect the current market value of the option written. The current market
value of a written option is the mean between the last bid and asked prices
on that day. If a written call option expires on the stipulated expiration
date, or if the Fund enters into a closing purchase transaction, the Fund
realizes a gain (or a loss if the closing purchase transaction exceeds the
premium received when the option was written) without regard to any
unrealized gain or loss on the underlying security, and the liability related
to such option is extinguished. If a written option is exercised, the Fund
realizes a gain or a loss from the sale of the underlying security and the
proceeds of the sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
G. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
H. Foreign Currency Contracts - A forward currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company and
AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1996, AIM was reimbursed $39,552 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1996, the Fund incurred legal fees of
$3,079 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1996 was $246,780,569 and $180,020,101, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $26,960,222
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (3,471,926)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $23,488,296
==========================================================================
</TABLE>
Cost of investments for tax purposes is $154,999,427.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold 3,676,649 $57,637,947 3,110,541 $41,750,413
- --------------------------------------------------------------------------
Issued as reinvestment of
distributions 511,063 8,105,455 3,426 48,608
- --------------------------------------------------------------------------
Reacquired (304,826) (4,772,074) (255,480) (3,153,762)
- --------------------------------------------------------------------------
3,882,886 $60,971,328 2,858,487 $38,645,259
==========================================================================
</TABLE>
NOTE 6 - OPEN COVERED CALL OPTIONS CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1996
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period -- --
- -------------------------------------------
Written 4,081 $ 1,730,497
- -------------------------------------------
Exercised (380) (105,055)
- -------------------------------------------
Expired (184) (47,712)
- -------------------------------------------
Closed (2,897) (1,234,757)
- -------------------------------------------
End of period 620 $ 342,973
===========================================
</TABLE>
AIM V.I. GROWTH FUND
53
<PAGE>
Open call option contracts written at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1996 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- ----------------------- -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Boston Scientific Corp. January 50 52 $ 37,959 $ 53,625 $(15,666)
Cascade Communications
Corp. January 65 110 60,355 7,562 52,793
Cascade Communications
Corp. January 80 140 78,187 1,750 76,437
Federal Home Loan
Mortgage Association January 90 68 54,976 139,400 (84,424)
HBO & Co. February 60 250 111,496 104,688 6,808
--- -------- -------- --------
620 $342,973 $307,025 $35,948
- ---------------------------------------------------------------------------------------
</TABLE>
NOTE 7 - FUTURES CONTRACTS
On December 31, 1996, $255,000 par value U.S. Treasury bills were pledged as
collateral to cover margin requirements for futures contracts.
Futures contracts outstanding at December 31, 1996:
<TABLE>
<CAPTION>
NO. OF UNREALIZED
CONTRACT CONTRACTS MONTH COMMITMENT APPRECIATION
<S> <C> <C> <C> <C>
S&P 500 Index 17 contracts Mar 97 Buy $83,436
</TABLE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, the eleven months ended December 31,
1995, the year ended January 31, 1995 and the period May 5, 1993 (date
operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
--------------------- -----------------
1996 1995 1995 1994
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 14.44 $ 10.71 $ 11.59 $ 10.00
- ---------------------------- -------- -------- ------- -------
Income from investment
operations:
Net investment income 0.07 0.09 0.06 0.02
- ---------------------------- -------- -------- ------- -------
Net gains (losses) on
securities (both realized
and unrealized) 2.52 3.65 (0.88) 1.59
- ---------------------------- -------- -------- ------- -------
Total from investment
operations 2.59 3.74 (0.82) 1.61
- ---------------------------- -------- -------- ------- -------
Less distributions:
Dividends from net
investment income (0.06) (0.01) (0.06) (0.02)
- ---------------------------- -------- -------- ------- -------
Distributions from capital
gains (0.72) -- -- --
- ---------------------------- -------- -------- ------- -------
Total distributions (0.78) (0.01) (0.06) (0.02)
- ---------------------------- -------- -------- ------- -------
Net asset value, end of
period $ 16.25 $ 14.44 $ 10.71 $ 11.59
============================ ======== ======== ======= =======
Total return(a) 18.09% 34.89% (7.11)% 16.07%
============================ ======== ======== ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $178,638 $102,600 $45,497 $25,115
============================ ======== ======== ======= =======
Ratio of expenses to average
net assets 0.78%(b) 0.84%(c) 0.95% 0.85%(c)(d)
============================ ======== ======== ======= =======
Ratio of net investment
income to average net
assets 0.79%(b) 0.95%(c) 0.71% 0.51%(c)(d)
============================ ======== ======== ======= =======
Portfolio turnover rate 143% 125% 179% 99%
============================ ======== ======== ======= =======
Average broker commission
rate(e) $ 0.0629 N/A N/A N/A
============================ ======== ======== ======= =======
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $140,923,834.
(c)Annualized.
(d) Annualized ratios of expenses and net investment income (loss) to average
net assets prior to waiver of advisory fees are 1.50% and (0.14)%,
respectively.
(e) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
NOTE 9 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to
which AIM Management will be merged with and into a direct wholly-owned
subsidiary of INVESCO plc. AIM Management is the parent company of the Fund's
advisor. The merger is expected to take place during the first quarter of 1997.
AIM V.I. GROWTH FUND
54
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Growth Fund, a series of shares of common stock of AIM Variable Insurance
Funds, Inc. including the schedule of investments as of December 31, 1996, the
related statement of operations for the year then ended, the statement of
changes in net assets for the year then ended and the eleven month period ended
December 31, 1995 and the financial highlights for the year then ended, the
eleven month period ended December 31, 1995, the year ended January 31, 1995,
and the period May 5, 1993 (commencement of operations) through January 31,
1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. Where
brokers did not reply to our confirmation requests, we carried out other
appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Growth Fund, as of December 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for the year then ended and
the eleven month period ended December 31, 1995 and the financial highlights
for the year then ended, the eleven month period ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (commencement of
operations) through January 31, 1994, in conformity with generally accepted
accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. GROWTH FUND
55
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
1996 FAVORED
GROWTH AND INCOME INVESTORS
A roundtable discussion with the Fund management team
for AIM V.I. Growth and Income Fund for the fiscal year ended December 31, 1996.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID AIM V.I. GROWTH AND Q. HOW DID YOU MANAGE THE PORTFOLIO Top 10 Holdings
INCOME FUND PERFORM DURING THE DURING THIS PERIOD? As of 12/31/96
FISCAL YEAR? A. We looked for companies with attrac-
A. Stocks delivered another tive dividends that seemed capable of 1. Philip Morris Companies, Inc.
strong year in 1996; bonds had a growing their earnings whatever the 2. Cincinnati Bell, Inc.
more difficult time. Nonetheless, state of the economy. 3. Hewlett-Packard Co.
growth and income funds were the About 80% of the portfolio is 4. Bristol-Meyers Squibb Co.
best performers among fund categories, invested in dividend-paying common 5. SmithKline Beecham plc-ADR
according to Lipper Analytical stocks and convertible securities. 6. Federal National
Services, Inc. AIM V.I. Growth and Convertibles often are very attractive Mortgage Association
Income Fund posted a strong total because they produce a steady income 7. MFS Communications Co.
return of 19.95% for the year ended stream while participating in any 8. CIGNA Corp.
12/31/96. advance in the market value of the 9. Rhone-Poulenc Rorer, Inc.
underlying common stock. At the 10. Ceridian Corp.
Q. HOW WOULD YOU DESCRIBE MARKET close of the fiscal year, the Fund's
CONDITIONS DURING THE FISCAL YEAR? portfolio was composed of 197 holdings. Please keep in mind that the Fund's
A. For most of the year, investors portfolio composition is subject to
were concerned with pace of economic Q. DID THE PORTFOLIO CONTAIN ANY change and there is no assurance the
growth and the possibility of rising NOTABLE CONVERTIBLE SECURITIES? Fund will continue to hold any
interest rates. Higher interest A. Service Corp. International, or particular security.
rates erode the profits of SCI has been a profitable holding. SCI
corporations and the value of fixed- is the world's largest operator of Q. WHAT DO YOU LIKE ABOUT THE
income securities. That translated funeral homes and cemeteries, and HEALTH-CARE SECTOR?
to extreme volatility in financial through aggressive acquisitions has A. One health-care segment,
markets. While stocks rose to record been the leading consolidator in a pharmaceuticals, represents more
levels during the year, circuit breakers very fragmented, localized industry. than 10% of the Fund's portfolio.
on the New York Stock Exchange, which SCI's convertible preferred stock It's an industry in which recent
temporarily suspend trading to check has offered dividends combined with mergers have improved operating
volatility, were triggered a record growth in market value as the price efficiencies and reduced costs.
96 times. of the company's common stock has One holding, American Home Prod-
Bond markets suffered from changing risen. ucts, Corp. participates in both
expectations about the directions of the these trends. Its 1994 acquisition
economy. Indications of surprisingly Q. WERE THERE PARTICULAR INDUSTRIES of American Cyanamid boosted earnings
strong economic growth early in the year IN WHICH YOU FOUND GOOD OPPORTUNITIES? per share because of cost savings.
sent bond prices tumbling the first A. We found good opportunities in the And the company owns a majority
nine months of 1996. Investment-grade health-care sector, particularly stake in Immunex, which
bonds began to recover in the fall pharmaceuticals, and also in technology.
when it became apparent that economic
growth was moderate and without
inflation, but their performance for
the year was disappointing.
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
56
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
recently received Food and Drug Q. DID YOU FIND TECHNOLOGY STOCKS Technology giants Microsoft
Administration approval for an easier- THAT ESCAPED THE GENERAL VOLATILITY Corp. and Intel Corp. continued as
to-administer version of a drug that IN THAT SECTOR? market leaders during the year
treats side effects of chemotherapy thanks to their ability to generate
for leukemia. A. Many technology stocks tend to strong profit growth. Microsoft's
A number of compelling factors be volatile, and many had steep declines Windows NT and Intel's Pentium Pro
suggest further growth for the health- late in 1995 and in summer 1996. A chip have the potential to launch
care industry. An aging population is number already have started to rebound, another major upgrade cycle in
bound to produce continued demand. A and trends favor some technology spring 1997 that will benefit PC
new federal entitlement initiative in companies over others. For example, makers and software developers
the health-care area seems unlikely, while commodity-type semiconductor alike.
which means a more certain environment producers suffered from overcapacity Additionally, some companies
in the industry. and an inability to raise prices, that aren't official members of the
Finally, health-care companies have helped personal computer makers like technology universe but act as if
made enormous strides in cost control Compaq whose component costs decreased they are. We can use another
and increased efficiency through as a result. portfolio holding as an example.
consolidation in recent years. As its name suggests, Cincinnati
Bell, Inc. used to be a local phone
company. It had excellent billing
Growth of a $10,000 and customer information services.
Investment Capitalizing on this expertise, it
As of 12/31/96 now furnishes data processing,
consulting, and software development
AIM V.I. Capital S&P 500 services to AT&T Corp., among
Appreciation Fund Stock Index others.
<S> <C> <C>
5/5/93 $10,000 $10,000 Q. WHICH OTHER INDUSTRIES DID YOU
7/93 10,030 10,193 FIND ATTRACTIVE?
10/94 10,344 10,581
1/95 10,090 10,615 A. Financial companies, especially
4/95 11,201 11,687 asset managers, have been a good
7/95 12,559 12,847 investment. Record trading volumes
10/95 13,056 13,370 on the nation's biggest stock
1/96 13,680 14,708 exchanges and a wave of merger and
4/96 14,398 15,209 acquisition activity have contrib-
7/96 13,881 14,962 uted to record earnings for
10/96 15,274 16,582 brokerage houses.
12/96 16,054 17,506 The profitability of the mutual
fund industry also has helped such
portfolio holdings as Morgan
Stanley Group Inc. and Merrill
Lynch & Co. Inc.
Q. WHAT IS YOUR OUTLOOK FOR THE
MARKET IN 1997?
AVERAGE ANNUAL TOTAL RETURN Past performance cannot guarantee
As of 12/31/96 comparable future results. A. Conditions appear favorable for
1 Year 19.95% stocks in general, and better for
Inception (5/2/94) 19.43 fixed-income securities. The
economy is growing at a reasonable
The performance figures shown represent the AIM V.I. Growth and Income Fund rate without rising inflation, and
and are not intended to reflect actual annuity values, and do not reflect that reduces the likelihood that
charges at the separate account level which, if applied, would lower the interest rates may increase over
performance results. The Fund's performance figures are historical and reflect the near term.
reinvestment of all distributions and changes in the net asset value. The Slower economic growth and
Fund's investment return and principal value will fluctuate so that Fund shares, stable interest rates should help
when redeemed, may be worth more or less than their original cost. Source: fixed-income securities regain some
Towers Data Systems HYPO. --Registered Trademark-- stability in 1997. Such
The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of conditions may not help stocks con-
unmanaged securities widely regarded by investors to be representative of the tinue at their robust pace. After
stock market in general. Source: Towers Data Systems HYPO. --Registered Trademark-- two remarkable years of record-
As investment cannot be made in the indexes listed. Index results include breaking performance, stocks are
reinvested dividends. expected to deliver gains in line
with more conservative, historical
levels.
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
57
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 76.90%
ADVERTISING/BROADCASTING - 0.45%
Eagle River Interactive, Inc.(a) 25,000 $ 196,875
- --------------------------------------------------------------------
True North Communications, Inc. 34,000 743,750
- --------------------------------------------------------------------
940,625
- --------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.74%
Rockwell International Corp.(a) 12,500 760,937
- --------------------------------------------------------------------
United Technologies Corp. 12,000 792,000
- --------------------------------------------------------------------
1,552,937
- --------------------------------------------------------------------
APPLIANCES - 0.47%
Sunbeam Corp., Inc. 38,000 978,500
- --------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES - 0.21%
Lear Corp.(a) 13,000 443,625
- --------------------------------------------------------------------
BANKING - 0.50%
Marshall & Ilsley Corp. 30,000 1,038,750
- --------------------------------------------------------------------
BANKING (MONEY CENTER) - 1.20%
BankAmerica Corp. 9,000 897,750
- --------------------------------------------------------------------
Chase Manhattan Corp. 18,000 1,606,500
- --------------------------------------------------------------------
2,504,250
- --------------------------------------------------------------------
BUSINESS SERVICES - 2.75%
AccuStaff, Inc.(a) 33,000 697,125
- --------------------------------------------------------------------
Cognizant Corp.(a) 28,000 924,000
- --------------------------------------------------------------------
CUC International, Inc.(a) 25,000 593,750
- --------------------------------------------------------------------
Diebold, Inc. 28,000 1,760,500
- --------------------------------------------------------------------
Equifax, Inc. 46,000 1,408,750
- --------------------------------------------------------------------
Sensormatic Electronics Corp. 22,000 368,500
- --------------------------------------------------------------------
5,752,625
- --------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.52%
IMC Global, Inc. 28,000 1,095,500
- --------------------------------------------------------------------
COMPUTER MINI/PCS - 2.38%
Gateway 2000, Inc.(a) 13,000 696,313
- --------------------------------------------------------------------
Hewlett-Packard Co. 65,000 3,266,250
- --------------------------------------------------------------------
Sun Microsystems, Inc.(a) 40,000 1,027,500
- --------------------------------------------------------------------
4,990,063
- --------------------------------------------------------------------
COMPUTER NETWORKING - 2.71%
Ascend Communications, Inc.(a) 20,000 1,242,500
- --------------------------------------------------------------------
Cascade Communications Corp.(a) 26,000 1,433,250
- --------------------------------------------------------------------
Cisco Systems, Inc.(a) 24,000 1,527,000
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING - (CONTINUED)
Comverse Technology, Inc.(a) 15,000 $ 567,187
- --------------------------------------------------------------------
ECI Telecommunications Ltd. Designs (Israel) 42,000 892,500
- --------------------------------------------------------------------
5,662,437
- --------------------------------------------------------------------
COMPUTER PERIPHERALS - 0.96%
U.S. Robotics Corp.(a) 28,000 2,016,000
- --------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 6.86%
Cadence Design Systems, Inc.(a) 18,000 715,500
- --------------------------------------------------------------------
Ceridian Corp.(a) 54,000 2,187,000
- --------------------------------------------------------------------
Computer Associates International, Inc. 16,900 840,775
- --------------------------------------------------------------------
CompuWare Corp.(a) 23,000 1,152,875
- --------------------------------------------------------------------
Electronic Data Systems Corp. 24,000 1,038,000
- --------------------------------------------------------------------
Farallon Communications(a) 7,500 47,813
- --------------------------------------------------------------------
Fiserv, Inc.(a) 21,000 771,750
- --------------------------------------------------------------------
HBO & Co. 12,000 712,500
- --------------------------------------------------------------------
Learning Company, Inc. (The) (a) 40,000 575,000
- --------------------------------------------------------------------
Microsoft Corp.(a) 12,000 991,500
- --------------------------------------------------------------------
National Data Corp. 12,600 548,100
- --------------------------------------------------------------------
Oracle Corp.(a) 12,000 501,000
- --------------------------------------------------------------------
Sterling Commerce, Inc.(a) 60,000 2,115,000
- --------------------------------------------------------------------
Wallace Computer Services, Inc. 62,500 2,156,250
- --------------------------------------------------------------------
14,353,063
- --------------------------------------------------------------------
CONGLOMERATES - 2.02%
Allied-Signal Inc. 14,000 938,000
- --------------------------------------------------------------------
Du Pont (E.I.) de Nemours & Co. 12,000 1,132,500
- --------------------------------------------------------------------
Loews Corp. 23,000 2,167,750
- --------------------------------------------------------------------
4,238,250
- --------------------------------------------------------------------
COSMETICS & TOILETRIES - 2.03%
Avon Products, Inc. 11,400 651,225
- --------------------------------------------------------------------
Clorox Co. 10,000 1,003,750
- --------------------------------------------------------------------
Gillette Co. (The) 14,000 1,088,500
- --------------------------------------------------------------------
Warner-Lambert Co. 20,000 1,500,000
- --------------------------------------------------------------------
4,243,475
- --------------------------------------------------------------------
ELECTRONIC COMPONENT/MISCELLANEOUS - 1.88%
General Electric Co. 20,000 1,977,500
- --------------------------------------------------------------------
General Signal Corp. 18,000 769,500
- --------------------------------------------------------------------
Honeywell, Inc. 9,000 591,750
- --------------------------------------------------------------------
Imation Corp.(a) 21,000 590,625
- --------------------------------------------------------------------
3,929,375
- --------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
58
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (ASSET MANAGEMENT) - 2.02%
Franklin Resources, Inc. 18,500 $ 1,264,938
- -----------------------------------------------------------------------
Merrill Lynch & Co., Inc. 16,000 1,304,000
- -----------------------------------------------------------------------
Morgan Stanley Group, Inc. 12,500 714,062
- -----------------------------------------------------------------------
Schwab (Charles) Corp. 16,000 512,000
- -----------------------------------------------------------------------
United Assets Management Corp. 16,000 426,000
- -----------------------------------------------------------------------
4,221,000
- -----------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 2.53%
American Express Co. 18,000 1,017,000
- -----------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 13,500 1,486,688
- -----------------------------------------------------------------------
Federal National Mortgage Association 75,000 2,793,750
- -----------------------------------------------------------------------
5,297,438
- -----------------------------------------------------------------------
FINANCE (SAVINGS & LOANS) - 0.44%
Washington Mutual, Inc. 21,200 918,225
- -----------------------------------------------------------------------
FOOD/PROCESSING - 0.78%
Hormel Foods Corp. 13,700 369,900
- -----------------------------------------------------------------------
Interstate Bakeries Corp. 15,000 736,875
- -----------------------------------------------------------------------
Nabisco Holdings Corp. - Class A 13,300 517,037
- -----------------------------------------------------------------------
1,623,812
- -----------------------------------------------------------------------
FUNERAL SERVICES - 0.16%
Service Corp. International 12,000 336,000
- -----------------------------------------------------------------------
GAMING - 0.75%
International Game Technology 50,000 912,500
- -----------------------------------------------------------------------
Mirage Resorts, Inc.(a) 30,000 648,750
- -----------------------------------------------------------------------
1,561,250
- -----------------------------------------------------------------------
HOTELS/MOTELS - 0.17%
HFS, Inc.(a) 6,000 358,500
- -----------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.28%
Provident Companies, Inc. 12,000 580,500
- -----------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 4.41%
Allstate Corp. 33,000 1,909,875
- -----------------------------------------------------------------------
Chubb Corp. 9,600 516,000
- -----------------------------------------------------------------------
CIGNA Corp. 19,000 2,595,875
- -----------------------------------------------------------------------
ITT Hartford Group, Inc. 10,000 675,000
- -----------------------------------------------------------------------
MBIA, Inc. 5,000 506,250
- -----------------------------------------------------------------------
Travelers Group, Inc. 30,999 1,406,580
- -----------------------------------------------------------------------
Travelers/Aetna Property Casualty Corp. 25,000 884,375
- -----------------------------------------------------------------------
USF&G Corp. 35,000 730,625
- -----------------------------------------------------------------------
9,224,580
- -----------------------------------------------------------------------
LEISURE & RECREATION - 1.30%
Brunswick Corp. 30,000 720,000
- -----------------------------------------------------------------------
Callaway Golf Co. 35,000 1,006,250
- -----------------------------------------------------------------------
Eastman Kodak Co. 12,500 1,003,125
- -----------------------------------------------------------------------
2,729,375
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MACHINE TOOLS - 0.12%
Stanley Works 9,000 $ 243,000
- -----------------------------------------------------------------------
MACHINERY (HEAVY) - 0.89%
Caterpillar Inc. 13,000 978,250
- -----------------------------------------------------------------------
Deere & Co. 22,000 893,750
- -----------------------------------------------------------------------
1,872,000
- -----------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 0.98%
Thermo Electron Corp.(a) 50,000 2,062,500
- -----------------------------------------------------------------------
MEDICAL (DRUGS) - 10.06%
Abbott Laboratories 15,000 761,250
- -----------------------------------------------------------------------
American Home Products Corp. 35,000 2,051,875
- -----------------------------------------------------------------------
Bristol-Myers Squibb Co. 30,000 3,262,500
- -----------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 16,000 764,000
- -----------------------------------------------------------------------
Johnson & Johnson 30,000 1,492,500
- -----------------------------------------------------------------------
Lilly (Eli) & Co. 14,000 1,022,000
- -----------------------------------------------------------------------
Pfizer, Inc. 12,000 994,500
- -----------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 50,000 1,981,250
- -----------------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 30,000 2,343,750
- -----------------------------------------------------------------------
Schering-Plough Corp. 14,000 906,500
- -----------------------------------------------------------------------
SmithKline Beecham PLC-ADR (United Kingdom) 45,000 3,060,000
- -----------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd. - ADR (Israel) 34,000 1,708,500
- -----------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 16,000 719,000
- -----------------------------------------------------------------------
21,067,625
- -----------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS) - 1.38%
Baxter International Inc. 34,000 1,394,000
- -----------------------------------------------------------------------
Boston Scientific Corp.(a) 17,000 1,020,000
- -----------------------------------------------------------------------
Omnicare, Inc. 15,000 481,875
- -----------------------------------------------------------------------
2,895,875
- -----------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 3.24%
American Medical Response, Inc.(a) 15,000 487,500
- -----------------------------------------------------------------------
Columbia/HCA Healthcare Corp. 40,000 1,630,000
- -----------------------------------------------------------------------
Genesis Health Ventures, Inc.(a) 19,862 618,213
- -----------------------------------------------------------------------
MedPartners, Inc.(a) 60,000 1,260,000
- -----------------------------------------------------------------------
OrNda HealthCorp(a) 20,000 585,000
- -----------------------------------------------------------------------
PhyCor, Inc.(a) 20,000 567,500
- -----------------------------------------------------------------------
Tenet Healthcare Corp.(a) 44,000 962,500
- -----------------------------------------------------------------------
United Healthcare Corp.(a) 15,000 675,000
- -----------------------------------------------------------------------
6,785,713
- -----------------------------------------------------------------------
NATURAL GAS PIPELINE - 1.55%
El Paso Natural Gas Co. 16,300 823,150
- -----------------------------------------------------------------------
Sonat, Inc. 12,000 618,000
- -----------------------------------------------------------------------
Williams Companies, Inc. (The) 48,000 1,800,000
- -----------------------------------------------------------------------
3,241,150
- -----------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
59
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OFFICE AUTOMATION - 0.53%
Xerox Corp. 21,000 $ 1,105,125
- -------------------------------------------------------------------------------
OIL & GAS (DRILLING) - 0.25%
Reading & Bates Corp.(a) 20,000 530,000
- -------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.30%
Transocean Offshore Inc. 10,000 626,250
- -------------------------------------------------------------------------------
OIL & GAS (SERVICES) - 1.67%
Halliburton Co. 16,000 964,000
- -------------------------------------------------------------------------------
Mobil Corp. 8,000 978,000
- -------------------------------------------------------------------------------
Petroleum Geo-Services ASA-ADR (Norway)(a) 13,400 522,600
- -------------------------------------------------------------------------------
Royal Dutch Petroleum Co. (Netherlands) 6,000 1,024,500
- -------------------------------------------------------------------------------
3,489,100
- -------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES - 0.43%
BJ Services Co.(a) 4,300 219,300
- -------------------------------------------------------------------------------
Diamond Offshore Drilling, Inc.(a) 12,000 684,000
- -------------------------------------------------------------------------------
903,300
- -------------------------------------------------------------------------------
PUBLISHING - 0.53%
Harcourt General, Inc. 24,000 1,107,000
- -------------------------------------------------------------------------------
RAILROADS - 0.05%
Wisconsin Central Transportation Corp.(a) 2,900 114,913
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 1.83%
Crescent Real Estate Equities, Inc. 20,000 1,055,000
- -------------------------------------------------------------------------------
FelCor Suite Hotels, Inc. 15,000 530,625
- -------------------------------------------------------------------------------
National Health Investors, Inc. 14,000 530,250
- -------------------------------------------------------------------------------
Patriot American Hospitality, Inc. 22,000 948,750
- -------------------------------------------------------------------------------
Starwood Lodging Trust 14,000 771,750
- -------------------------------------------------------------------------------
3,836,375
- -------------------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 0.99%
Food Lion, Inc. - Class A 80,000 782,500
- -------------------------------------------------------------------------------
Safeway, Inc.(a) 30,000 1,282,500
- -------------------------------------------------------------------------------
2,065,000
- -------------------------------------------------------------------------------
RETAIL (STORES) - 0.46%
Blue Square - Israel Ltd. - ADR (Israel)(a) 30,000 427,500
- -------------------------------------------------------------------------------
Corporate Express, Inc.(a) 18,000 529,875
- -------------------------------------------------------------------------------
957,375
- -------------------------------------------------------------------------------
SEMICONDUCTORS - 1.61%
Applied Materials, Inc.(a) 18,000 646,875
- -------------------------------------------------------------------------------
Intel Corp. 12,000 1,571,250
- -------------------------------------------------------------------------------
Texas Instruments, Inc. 18,000 1,147,500
- -------------------------------------------------------------------------------
3,365,625
- -------------------------------------------------------------------------------
SHOES & RELATED APPAREL - 0.27%
Nike, Inc. - Class B 9,400 561,650
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS - 5.31%
ADC Telecommunications, Inc.(a) 6,200 $ 192,975
- -------------------------------------------------------------------------------
Aerial Communications Inc.(a) 24,000 195,000
- -------------------------------------------------------------------------------
Andrew Corp.(a) 20,000 1,061,250
- -------------------------------------------------------------------------------
LCI International, Inc.(a) 30,000 645,000
- -------------------------------------------------------------------------------
Lucent Technologies, Inc. 25,000 1,156,250
- -------------------------------------------------------------------------------
MFS Communications Co., Inc.(a) 49,384 2,691,428
- -------------------------------------------------------------------------------
Nokia Oy A.B. - Class A - ADR (Finland) 29,000 1,671,125
- -------------------------------------------------------------------------------
PairGain Technologies, Inc.(a) 36,000 1,095,750
- -------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - ADR (Sweden) 50,000 1,509,375
- -------------------------------------------------------------------------------
Tellabs, Inc.(a) 10,000 376,250
- -------------------------------------------------------------------------------
WorldCom, Inc.(a) 20,000 521,250
- -------------------------------------------------------------------------------
11,115,653
- -------------------------------------------------------------------------------
TELEPHONE - 2.64%
BellSouth Corp. 26,000 1,049,750
- -------------------------------------------------------------------------------
Cincinnati Bell, Inc. 56,000 3,451,000
- -------------------------------------------------------------------------------
SBC Communications, Inc. 20,000 1,035,000
- -------------------------------------------------------------------------------
5,535,750
- -------------------------------------------------------------------------------
TOBACCO - 3.18%
Philip Morris Companies, Inc. 44,000 4,955,500
- -------------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 50,000 1,700,000
- -------------------------------------------------------------------------------
6,655,500
- -------------------------------------------------------------------------------
TRANSPORTATION (MISCELLANEOUS) - 0.11%
Hvide Marine, Inc. - Class A(a) 11,000 239,250
- -------------------------------------------------------------------------------
Total Common Stocks 160,965,884
- -------------------------------------------------------------------------------
PRINCIPAL
CONVERTIBLE CORPORATE BONDS - 8.74% AMOUNT
AUTOMOBILE/TRUCK PARTS & TIRES - 0.52%
Magna International, Inc. (Canada), Conv. Sub. Deb.,
5.00%, 10/15/02 $ 950,000 1,097,525
- -------------------------------------------------------------------------------
BUSINESS SERVICES - 0.24%
Career Horizons, Inc., Conv. Bonds, 7.00%, 11/01/02(b)
(Acquired 11/27/95 - 10/07/96; Cost $442,030) 250,000 494,413
- -------------------------------------------------------------------------------
COMPUTER MINI/PCS - 0.48%
Apple Computer, Inc., Conv. Sub. Notes, 6.00%, 06/01/01 1,000,000 1,009,950
- -------------------------------------------------------------------------------
COMPUTER NETWORKING - 0.64%
3Com Corp., Conv. Sub. Notes, 10.25%, 11/01/01(b)
(Acquired 11/14/95 - 09/25/96; Cost $995,305) 600,000 1,335,978
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 1.40%
Baan Co., N.V. (Netherlands), Conv. Sub. Notes, 4.50%,
12/23/01(b)
(Acquired 12/12/96; Cost $1,000,000) 1,000,000 1,004,460
- -------------------------------------------------------------------------------
First Financial Management Corp., Conv. Deb., 5.00%,
12/15/99 500,000 865,285
- -------------------------------------------------------------------------------
Silicon Graphics, Inc., Conv. Sub. Deb., 4.15%,
11/02/13(c) 2,000,000 1,060,000
- -------------------------------------------------------------------------------
2,929,745
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
60
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ELECTRONIC COMPONENTS/MISCELLANEOUS - 0.22%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%, 05/01/06(b)
(Acquired 10/24/96 - 10/29/96; Cost $500,282) $ 400,000 $ 467,148
- ------------------------------------------------------------------------------
MEDICAL (DRUGS) - 0.12%
ICN Pharmaceuticals, Inc., Conv. Sub. Notes, 8.50%,
11/15/99 225,000 247,219
- ------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 0.89%
FPA Medical Management, Inc., Conv. Sub. Deb., 6.50%,
12/15/01(b)
(Acquired 02/07/96; Cost $750,000) 750,000 753,750
- ------------------------------------------------------------------------------
HEALTHSOUTH Rehabilitation Corp., Conv. Sub. Deb.,
5.00%, 04/01/01 300,000 604,005
- ------------------------------------------------------------------------------
Multicare Companies Inc., Conv. Sub. Deb., 7.00%,
03/15/03(b) (Acquired 11/30/95; Cost $103,500) 100,000 122,500
- ------------------------------------------------------------------------------
Physicians Resource Group, Inc., Conv. Sub. Deb.,
6.00%, 12/01/01(b)
(Acquired 12/06/96; Cost $396,384) 400,000 392,088
- ------------------------------------------------------------------------------
1,872,343
- ------------------------------------------------------------------------------
OFFICE AUTOMATION - 0.39%
Danka Business Systems PLC (United Kingdom), Conv. Sub.
Notes, 6.75%, 04/01/02(b)
(Acquired 11/30/95 - 10/16/96; Cost $798,918) 600,000 812,640
- ------------------------------------------------------------------------------
OFFICE PRODUCTS - 0.31%
U.S. Office Products Co., Conv. Sub. Notes, 5.50%,
02/01/01 500,000 645,395
- ------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.42%
Apache Corp., Conv. Sub. Deb., 6.00%, 01/15/02(b)
(Acquired 06/14/96 - 12/31/96; Cost $833,125) 700,000 878,500
- ------------------------------------------------------------------------------
POLLUTION CONTROL - 0.88%
Sanifill, Inc., Conv. Sub. Deb., 5.00%, 03/01/06 600,000 764,784
- ------------------------------------------------------------------------------
U.S. Filter Corp., Conv. Sub. Notes, 6.00%, 09/15/05 600,000 1,069,500
- ------------------------------------------------------------------------------
1,834,284
- ------------------------------------------------------------------------------
RETAIL (STORES) - 0.57%
Federated Department Stores, Inc., Conv. Notes, 5.00%,
10/01/03 500,000 584,375
- ------------------------------------------------------------------------------
Staples, Inc., Conv. Sub. Deb., 4.50%, 10/01/00(b)
(Acquired 09/16/96 - 10/28/96; Cost $664,113) 600,000 617,496
- ------------------------------------------------------------------------------
1,201,871
- ------------------------------------------------------------------------------
SEMICONDUCTORS - 1.38%
Altera Corp., Conv. Sub. Notes, 5.75%, 06/15/02(b)
(Acquired 09/16/96 - 09/26/96; Cost $712,454) 600,000 938,028
- ------------------------------------------------------------------------------
Analog Devices, Conv. Sub. Notes, 3.50% 12/01/00 550,000 768,284
- ------------------------------------------------------------------------------
National Semiconductor Corp., Conv. Deb., 6.50%,
10/01/02 1,200,000 1,191,000
- ------------------------------------------------------------------------------
2,897,312
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TRANSPORTATION - 0.28%
Seacor Holdings Inc., Conv. Sub. Notes, 5.375%,
11/15/06 $ 500,000 $ 582,715
- ------------------------------------------------------------------------------
Total Convertible Corporate Bonds 18,307,038
- ------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 6.52% SHARES
AEROSPACE/DEFENSE - 0.49%
Loral Space & Communications - $3.00 Conv. Pfd. 18,000 1,023,750
- ------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 0.31%
Vanstar Financing Trust - $3.375 Conv. Pfd.(b)
(Acquired 09/27/96; Cost $619,250) 12,000 638,892
- ------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 0.67%
Penncorp Financial Group, Inc. - $3.375 Conv. Pfd. 5,000 420,000
- ------------------------------------------------------------------------------
SunAmerica, Inc. - Series E $3.10 Dep. Conv. Pfd. 10,000 972,500
- ------------------------------------------------------------------------------
1,392,500
- ------------------------------------------------------------------------------
FUNERAL SERVICES - 1.08%
SCI Financial LLC - Series A, $3.125 Conv. Pfd. 24,000 2,259,000
- ------------------------------------------------------------------------------
HOTELS/MOTELS - 0.36%
Host Marriott Financial Trust - $3.375 Conv. Pfd. 14,000 762,958
- ------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 1.68%
Conseco Inc. - $4.279 Conv. PRIDES 31,000 3,526,250
- ------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 0.23%
Allstate Corp. - $2.30 Conv. Pfd. 10,000 472,500
- ------------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS - 0.27%
U.S. Surgical Corp. - Series A $2.20 Conv. Pfd. 15,000 573,750
- ------------------------------------------------------------------------------
OIL & GAS (REFINING/MARKETING) - 0.15%
Tosco Financing Trust - $2.875 Conv. Pfd.(b)
(Acquired 12/10/96; Cost $300,612) 6,000 312,750
- ------------------------------------------------------------------------------
RETAIL (STORES) - 0.50%
TJX Cos., Inc. - Series E $7.00 Conv. Pfd. 4,000 1,047,500
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.78%
MFS Communications Co., Inc. - $2.68 Conv. Pfd. 18,000 1,642,500
- ------------------------------------------------------------------------------
Total Convertible Preferred Stocks 13,652,350
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES - 4.79%
U.S. TREASURY NOTES - 4.79%
5.125%, 02/28/98 $1,000,000 993,880
- ------------------------------------------------------------------------------
6.125%, 03/31/98 1,000,000 1,005,430
- ------------------------------------------------------------------------------
5.875%, 04/30/98 1,000,000 1,002,230
- ------------------------------------------------------------------------------
6.00%, 05/31/98 1,000,000 1,003,550
- ------------------------------------------------------------------------------
6.25%, 06/30/98 1,000,000 1,007,320
- ------------------------------------------------------------------------------
6.25%, 07/31/98 1,000,000 1,007,170
- ------------------------------------------------------------------------------
6.125%, 08/31/98 1,000,000 1,005,040
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
61
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY NOTES - (CONTINUED)
6.00%, 09/30/98 $1,000,000 $ 1,003,150
- ----------------------------------------------------------------------------
5.875%, 10/31/98 1,000,000 1,000,420
- ----------------------------------------------------------------------------
5.625%, 11/30/98 1,000,000 995,820
- ----------------------------------------------------------------------------
Total U.S. Treasury Securities 10,024,010
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENT - 5.43%(d)
Daiwa Securities America, Inc., 6.25%, 01/02/97(e) 11,372,723 11,372,723
- ----------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 102.38% 214,322,005
- ----------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (2.38%) (4,990,374)
- ----------------------------------------------------------------------------
NET ASSETS - 100.00% $209,331,631
============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted Security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at December 31, 1996 was
$8,768,643, which represents 3.74% of the Fund's net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of the
original issue discount.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into on 12/31/96 with maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Investment Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
Dep. - Depository
Pfd. - Preferred
PRIDES - Preferred Redeemable Increased Dividend Equity Securities
Sub. - Subordinated
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
62
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $194,097,782) $214,322,005
- ----------------------------------------------------------------------
Receivables for:
Investments sold 2,321,719
- ----------------------------------------------------------------------
Capital stock sold 662,812
- ----------------------------------------------------------------------
Dividends and interest 515,368
- ----------------------------------------------------------------------
Investment for deferred compensation plan 8,997
- ----------------------------------------------------------------------
Other assets. 163
- ----------------------------------------------------------------------
Total assets 217,831,064
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 8,321,159
- ----------------------------------------------------------------------
Capital stock reacquired 29,653
- ----------------------------------------------------------------------
Deferred compensation plan 8,997
- ----------------------------------------------------------------------
Accrued advisory fees 108,878
- ----------------------------------------------------------------------
Accrued administrative services fees 3,566
- ----------------------------------------------------------------------
Accrued directors' fees 1,590
- ----------------------------------------------------------------------
Accrued operating expenses 25,590
- ----------------------------------------------------------------------
Total liabilities 8,499,433
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $209,331,631
======================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 13,923,332
======================================================================
Net asset value, offering and redemption price per share $15.03
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $9,976 foreign withholding tax) $ 1,774,561
- -----------------------------------------------------------------------------
Interest 1,180,750
- -----------------------------------------------------------------------------
Total investment income 2,955,311
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 678,242
- -----------------------------------------------------------------------------
Custodian fees 52,175
- -----------------------------------------------------------------------------
Administrative services fees 38,784
- -----------------------------------------------------------------------------
Directors' fees and expenses 6,522
- -----------------------------------------------------------------------------
Other 38,734
- -----------------------------------------------------------------------------
Total expenses 814,457
- -----------------------------------------------------------------------------
Net investment income 2,140,854
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES, FOREIGN
CURRENCIES, AND FUTURES CONTRACTS:
Net realized gain from:
Investment securities 294,131
- -----------------------------------------------------------------------------
Foreign currency transactions 5,194
- -----------------------------------------------------------------------------
Futures contracts 166,173
- -----------------------------------------------------------------------------
465,498
- -----------------------------------------------------------------------------
Unrealized appreciation of investment securities 17,682,951
- -----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, and
futures contracts 18,148,449
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $20,289,303
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
63
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,140,854 $ 336,371
- -----------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, and futures contracts 465,498 1,441,764
- -----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, and futures
contracts 17,682,951 2,467,076
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 20,289,303 4,245,211
- -----------------------------------------------------------------------------
Net increase from capital stock transactions 152,726,725 28,382,638
- -----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (1,850,460) (325,888)
- -----------------------------------------------------------------------------
Distributions from net realized gains (401,149) (1,114,895)
- -----------------------------------------------------------------------------
Net increase in net assets 170,764,419 31,187,066
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 38,567,212 7,380,146
- -----------------------------------------------------------------------------
End of period $209,331,631 $38,567,212
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $188,521,678 $35,794,953
- -----------------------------------------------------------------------------
Undistributed net investment income 329,728 10,307
- -----------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, and futures
contracts 256,002 220,680
- -----------------------------------------------------------------------------
Unrealized appreciation of investment securities
and futures contracts 20,224,223 2,541,272
- -----------------------------------------------------------------------------
$209,331,631 $38,567,212
=============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Growth and Income Fund (the "Fund"). The Fund's investment
objective is to seek growth of capital, with current income as a secondary
objective. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies.
The following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Securities traded in the over-the-counter market,
except (i) securities for which representative exchange prices are
available, and (ii) securities reported in the NASDAQ National Market
System, are valued at the mean between representative last bid and asked
prices obtained from an electronic quotation reporting system, if such
prices are available, or from established market makers. Debt obligations
are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices,and may reflect appropriate factors
such as yield, type of issue, coupon rate and maturity date. Securities for
which market prices are not provided by any of the above methods are valued
at the mean between last bid and asked prices based upon quotes furnished
by independent sources. Short-term investments with remaining maturities of
up to and including 60 days are valued at amortized cost which approximates
market value. Short-term securities that mature in more than 60 days are
valued at current market quotations. Securities
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
64
<PAGE>
for which market quotations are not readily available or are questionable are
valued at fair value as determined in good faith by, or under the authority
of, the Board of Directors. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis. On December 31, 1996,
undistributed net investment income was increased by $29,027 and
undistributed net realized gains reduced by $29,027 in order to comply with
the requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts -- A forward currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a forward currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1996, AIM was reimbursed $38,784 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1996, the Fund incurred legal fees of
$2,947 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1996 was $300,305,769 and $151,370,201, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $22,509,165
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,475,760)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $20,033,405
==========================================================================
</TABLE>
Cost of investments for tax purposes is $194,288,600.
AIM V.I. GROWTH AND INCOME FUND
65
<PAGE>
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------ ----------------------
Shares Amount Shares Amount
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold 10,983,786 $153,919,542 2,208,514 $27,189,904
- ----------------------------------------------------------------------------
Issued as reinvestment of
distributions 154,220 2,251,608 115,538 1,440,783
- ----------------------------------------------------------------------------
Reacquired (255,903) (3,444,425) (22,290) (248,049)
- ----------------------------------------------------------------------------
10,882,103 $152,726,725 2,301,762 $28,382,638
============================================================================
</TABLE>
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, the eleven months ended December 31,
1995 and the period May 2, 1994 (date operations commenced) through January
31, 1995.
<TABLE>
<CAPTION>
December 31, January 31,
-------------------- -----------
1996 1995 1995
-------- ------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.68 $ 9.98 $10.00
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.16 0.14 0.11
- -------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 2.36 3.11 (0.02)
- -------------------------------------------------------------------------------
Total from investment operations 2.52 3.25 0.09
- -------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.14) (0.14) (0.11)
- -------------------------------------------------------------------------------
Distributions from capital gains (0.03) (0.41) --
- -------------------------------------------------------------------------------
Total distributions (0.17) (0.55) (0.11)
- -------------------------------------------------------------------------------
Net asset value, end of period $ 15.03 $ 12.68 $ 9.98
- -------------------------------------------------------------------------------
Total return(a) 19.95% 32.65% 0.90%
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s
omitted) $209,332 $38,567 $7,380
- -------------------------------------------------------------------------------
Ratio of expenses to average net
assets 0.78%(b) 0.78%(c) 1.07%(c)(d)
- -------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 2.05%(b) 1.92%(c) 1.95%(c)(d)
- -------------------------------------------------------------------------------
Portfolio turnover rate 148% 145% 96%
- -------------------------------------------------------------------------------
Average broker commission rate(e) $ 0.0644 N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
(a) Total return is not annualized for periods less than one year.
(b) Ratios are based on average net assets of $104,198,711.
(c) Annualized.
(d) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees are 1.72% and 1.30%, respectively.
(e) Disclosure requirement beginning with the Fund's fiscal year ended
December 31, 1996.
NOTE 7 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. GROWTH AND INCOME FUND
66
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Growth and Income Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1996, the related statement of operations for the year then ended, the
statement of changes in net assets for the year then ended and for the eleven
month period ended December 31, 1995 and the financial highlights for the year
then ended, the eleven month period ended December 31, 1995 and the period May
2, 1994 (commencement of operations) through January 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. Where
brokers did not reply to our confirmation requests, we carried out other
appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Growth and Income Fund, as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and for the eleven month period ended December 31, 1995 and the
financial highlights for the year then ended, for the eleven month period ended
December 31, 1995 and the period May 2, 1994 (commencement of operations)
through January 31, 1995, in conformity with generally accepted accounting
principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. GROWTH AND INCOME FUND
67
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
FOREIGN STOCK INVESTORS ARE
TREATED TO A STRONG 1996
A roundtable discussion with the Fund management team for AIM V.I. International
Equity Fund for the fiscal year ended December 31, 1996.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. WORLD EQUITY MARKETS CERTAINLY year, the club of countries likely Top 10 Equity Holdings
STRENGTHENED IN 1996. HOW DID to adopt a single currency in January (excluding U.S. Treasuries)
THE FUND PERFORM DURING THE RE- 1999 seemed to include a select few.
PORTING PERIOD? Now, many countries are cutting interest 1. Honda Motor Co. Ltd.
A. It has been a good year for foreign rates and attacking budget deficits 2. Autoliv A.B.
stocks, particularly in Europe. The in a scramble to qualify for EMU 3. Cosco Pacific Ltd.
Morgan Stanley Capital International standards, and financial markets have 4. Nokia Oy A.B.
(MSCI) Europe, Australia, and Far East roared their approval. 5. Cheung Kong-Holdings
Index (EAFE) of foreign stocks gained 6. PT Bank International Indonesia
6.05% for the year ended December 31, Q. HOW ABOUT THE PACIFIC RIM? Ltd.
1996. AIM V.I. International Equity A. Stock markets in Asia were thriving. 7. Canon, Inc.
Fund had a better year - total return Hong Kong and Malaysia, countries in 8. PT Hanjaya Mandala Sampoerna
as of December 31, 1996, was 20.05%. which the Fund invests, were among the 9. HSBC Holdings plc
That performance also bested the top-performing countries in the 10. Pinault-Printemps-Redoute S.A.
14.43% average total return for similar Pacific basin, based on U.S. dollars.
funds over the same period, according to Improved investor confidence has Please keep in mind that the Fund's
the Lipper International Fund Index. triggered a surge of funds into the portfolio composition is subject to
region. In China, companies on Hong change and there is no assurance the
Q. WHAT IGNITED THE PERFORMANCE Kong's Hang Seng stock market index Fund will continue to hold any
OF FOREIGN STOCKS? raised HK$22 billion ($2.8 billion) particular security.
A. Signs of improving economic perfor- in the first eight months of 1996.
mance, lower interest rates, and a Japan's stock market continued to Many of the strongest European per-
strong U.S. dollar encouraged investors languish as that economy struggled to formers in the Fund were long-term
to propel foreign stocks to enthusiastic emerge from recession. The Bank of favorites, including retailers
levels during 1996, especially in Europe. Japan has lowered interest rates to Pinault-Printemps-Redoute S.A. and
Cost savings from privatization and major near zero in an effort to stimulate Carrefour Supermarch in France, and
restructuring efforts have begun to bear growth, and recent economic data has British retailer Dixons Group plc and
fruit, and the momentum seems to be suggested some gathering strength. oil and gas giant British Petroleum
building. Japanese exporters were strong Co. plc.
Stock markets in the United Kingdom, beneficiaries of the continued
Denmark, Germany, Hungary, the Nether- strength in the U.S. dollar. However, Q. HOW WAS THE FUND INVESTED OUTSIDE
lands, Norway, Spain, Sweden, and consumer spending--the engine of OF EUROPE?
Switzerland set record highs for the domestic economic growth--continues to A. Hong Kong stocks again claimed many
year. Many of these countries were lag. of the Fund's larger equity
among the Fund's largest weightings. positions, including real estate
Q. HOW DID THE FUND TAKE ADVANTAGE OF company Cheung Kong-Holdings Ltd.,
Q. WHAT'S BEHIND THE ECONOMIC PROGRESS THE INVESTMENT CLIMATE OVERSEAS? major banks HSBC Holdings plc and
IN EUROPE? A. The Fund had a strong presence in Hang Seng Bank Ltd., and Cosco
A. Clearly, the drive to comply with Europe--more than 40% of the portfolio Pacific Ltd., a leading conglomerate.
European Monetary Unit standards has as of December 31, 1996--including many In Japan, the Fund reduced its
been a significant influence behind of the top-performing markets like the investment exposure to 16%, and
the economic revival. Earlier in the United Kingdom, Spain, Sweden, and continued to emphasize those companies
the Netherlands. that benefited
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
68
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
from the strong U.S. dollar and exhibited lower interest rates have boosted economic Q. WHAT IS YOUR OUTLOOK FOR THE
growing earnings. For example, auto-maker growth and helped to lower its stifling un- MARKET IN 1997?
Honda Motor Co., one of the Fund's largest employment rate. Holdings in Canada were
holding, profited by the comparative advan- increased to 3% of the Fund. A. Conditions appear favorable for
tage in currency exchange with the U.S. and foreign stocks in general, and even
by cutting production costs on their cars by Q. HOW WAS THE FUND POSITIONED AT better for European and Asian
one-third, THE END OF THE FISCAL YEAR? stocks. Low interest rates worldwide
have created an abundance of
Q. CANADA APPEARED AMONG THE FUND'S TOP A. The Fund held 186 stocks as of Decem- liquidity that should stoke eco-
COUNTRY WEIGHTINGS. WHAT IS BEHIND THE ber 31, 1996, spread over 30 countries and nomic activity in 1997.
STRONG PERFORMANCE IN THAT MARKET? 54 industry categories. The largest position In addition, increased global
weighting in the Fund was 1.14%. liquidity has discounted the cost
A. Stocks in Canada gained more than 20% More than 40% of the Fund's holdings of equity capital--another boost
for the year ended DEcember 31, 1996. The was invested in Europe, followed by 16% in for stocks. Cheap equity capital
country is a direct beneficiary of healthy Japan, 8% in Hong Kong, and 3% in Canada. helped markets like Germany and
economic conditions in the U.S. and the The Fund's net assets at the end of the France to surge 26% and 23%,
continued strength in the U.S. dollar. A reporting period stood at $166 million. respectively, in 1996 despite low
surge in Canadian exports to the U.S. and economic growth.
It also is good news for foreign
markets that the U.S. economy is
growing at a reasonable rate
without rising inflation, which
keeps the U.S. dollar strong and
reduces the likelihood that interest
rates may increase over the near
term. A strong U.S. dollar helps
foreign exporters remain
competitive. Lower interest rates
help stimulate the hard-won
progress in economic recovery,
particularly in Europe and Canada.
Growth of a $10,000
Investment
From 05/05/93-12/31/96
AIM V.I. International Lipper International Europe, Australia,
Equity Fund Fund Index Asia, Far East Index
(In thousands)
<S> <C> <C> <C>
5/5/93 $10,000 $10,000 $10,000
7/30/93 9,930 10,347 10,411 ------------------
10/29/93 11,240 11,535 11,064
1/31/94 12,490 12,947 11,749 It also is good news
4/29/94 11,930 12,376 11,695
7/29/94 12,040 12,538 11,913 for foreign markets
10/31/94 12,430 12,862 12,212
1/31/95 11,057 11,498 11,257 that the U.S. economy
4/28/95 12,099 12,231 12,383
7/31/95 13,382 13,080 12,779 is growing at a reasonable rate
10/31/95 13,272 12,802 12,204
1/31/96 13,714 13,625 13,112 without rising inflation.
4/30/96 15,100 14,350 13,837
7/31/96 14,738 13,979 13,269 ------------------
10/31/96 15,481 14,421 13,522
12/31/96 16,464 15,231 13,886
AVERAGE ANNUAL TOTAL RETURN Past performance cannot guarantee comparable
As of 12/31/96 future results.
1 Year 20.05%
Inception (5/5/93) 14.60
The performance figures shown represent the AIM V.I. International Equity Fund
and are not intended to reflect actual annuity values, and do not reflect
charges at the separate account level which, if applied, would lower the
performance results. The Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in the net asset value. The
Fund's investment return and principal value will fluctuate so that Fund shares,
when redeemed, may be worth more or less than their original cost. Source:
Towers Data Systems HYPO.--Registered Trademark--
The Europe, Australia, and Far East Index (EAFE) is a group of unmanaged foreign
securities. Source: Towers Data Systems HYPO. --Registered Trademark--
Lipper Analytical Services, Inc., is an independent mutual fund performance
monitor. The unmanaged Lipper International Equity Fund Index represents an
average of the performance of the 30 largest international mutual funds. Source:
Lipper Analytical Services, Inc.
An investment cannot be made in the indexes listed. Index results include
reinvested dividends.
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
69
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS - 92.37%
ARGENTINA - 1.66%
Banco de Galicia y Beunos Aires S.A. de C.V.-ADR
(Banking) 35,574 $ 862,670
- -------------------------------------------------------------------------------
Perez Companc S.A. - Class B (Oil & Gas - Services) 88,000 618,764
- -------------------------------------------------------------------------------
YPF Sociedad Anonima-ADR (Oil & Gas - Services) 50,400 1,272,600
- -------------------------------------------------------------------------------
2,754,034
- -------------------------------------------------------------------------------
AUSTRALIA -- 2.63%
National Mutual Holdings Ltd. (Insurance - Multi-Line
Property)(a) 373,000 557,380
- -------------------------------------------------------------------------------
News Corp. Ltd.-ADR (Publishing) 50,100 883,013
- -------------------------------------------------------------------------------
QBE Insurance Group Ltd. (Insurance - Multi-Line
Property) 163,815 863,281
- -------------------------------------------------------------------------------
QNI Ltd. (Metals - Miscellaneous) 523,300 1,052,340
- -------------------------------------------------------------------------------
WMC Ltd. (Metals - Miscellaneous) 158,500 999,050
- -------------------------------------------------------------------------------
4,355,064
- -------------------------------------------------------------------------------
AUSTRIA - 0.87%
OMV A.G. (Oil & Gas - Integrated) 6,500 732,927
- -------------------------------------------------------------------------------
VA Technologie A.G. (Engineering & Construction) 4,550 714,109
- -------------------------------------------------------------------------------
1,447,036
- -------------------------------------------------------------------------------
BELGIUM - 1.78%
Barco Industries (Electronic Components/Miscellaneous)(a) 4,000 690,883
- -------------------------------------------------------------------------------
COLRUYT S.A. (Retail - Food & Drug) 1,500 687,889
- -------------------------------------------------------------------------------
Delhaize-Le Lion, S.A. (Retail - Food & Drug) 12,300 730,770
- -------------------------------------------------------------------------------
UCB S.A. (Medical - Drugs) 320 834,103
- -------------------------------------------------------------------------------
2,943,645
- -------------------------------------------------------------------------------
BRAZIL - 0.67%
Telecomunicacoes Brasileiras S.A. - Telebras-ADR
(Telecommunications) 14,500 1,109,250
- -------------------------------------------------------------------------------
CANADA - 3.34%
Canadian National Railway Co. (Railroads) 17,200 653,600
- -------------------------------------------------------------------------------
Canadian Natural Resources Ltd. (Oil & Gas - Exploration
& Production)(a) 33,000 906,157
- -------------------------------------------------------------------------------
Canadian Pacific, Ltd. (Transportation) 30,200 800,300
- -------------------------------------------------------------------------------
Newbridge Networks Corp. (Computer Networking)(a) 19,400 548,050
- -------------------------------------------------------------------------------
Northern Telecom Ltd. (Telecommunications) 12,200 754,875
- -------------------------------------------------------------------------------
Suncor, Inc. (Oil & Gas - Exploration & Production) 19,000 786,752
- -------------------------------------------------------------------------------
Teleglobe, Inc. (Telecommunications) 15,000 443,657
- -------------------------------------------------------------------------------
TELUS Corp. (Telecommunications) 44,000 639,451
- -------------------------------------------------------------------------------
5,532,842
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CHILE - 0.37%
Cia. de Telecomunicaciones de Chile S.A.-ADR (Telephone) 6,000 $ 606,750
- -------------------------------------------------------------------------------
DENMARK - 0.77%
Danisco A.S. (Food/Processing) 7,800 474,027
- -------------------------------------------------------------------------------
Novo Nordisk A.S. - Class B (Medical - Drugs) 4,300 810,247
- -------------------------------------------------------------------------------
1,284,274
- -------------------------------------------------------------------------------
FINLAND - 1.00%
Nokia Oy A.B. - Class A (Telecommunications) 28,600 1,660,043
- -------------------------------------------------------------------------------
FRANCE - 8.06%
AXA S.A. (Insurance - Life & Health) 12,000 763,226
- -------------------------------------------------------------------------------
Carrefour Supermarche S.A. (Retail - Food & Drug) 1,870 1,216,753
- -------------------------------------------------------------------------------
Cetelem (Finance - Consumer Credit) 4,600 531,946
- -------------------------------------------------------------------------------
Compagnie Francaise d'Etudes et de Construction Technip
(Engineering & Construction) 5,800 544,396
- -------------------------------------------------------------------------------
Compagnie Generale des Eaux (Water Supply) 6,500 805,532
- -------------------------------------------------------------------------------
Elf Aquitaine S.A. (Oil & Gas - Services) 10,700 974,002
- -------------------------------------------------------------------------------
Essilor International (Medical Instruments/Products) 2,275 690,590
- -------------------------------------------------------------------------------
Michelin - Class B (Automobile/Truck Parts & Tires) 13,200 712,599
- -------------------------------------------------------------------------------
Pathe S.A. (Advertising/Broadcasting)(a) 2,550 614,339
- -------------------------------------------------------------------------------
Pinault-Printemps-Redoute S.A. (Retail - Stores) 3,560 1,412,061
- -------------------------------------------------------------------------------
Rexel S.A. (Electronic Component/Miscellaneous) 2,000 607,112
- -------------------------------------------------------------------------------
Rhone-Poulenc - Class A (Chemicals) 13,000 443,230
- -------------------------------------------------------------------------------
Roussel Uclaf (Medical - Drugs) 2,390 703,388
- -------------------------------------------------------------------------------
Societe BIC S.A. (Office Products) 5,150 772,227
- -------------------------------------------------------------------------------
Sodexho S.A. (Business Services) 1,400 779,802
- -------------------------------------------------------------------------------
Total S.A. - Class B (Oil & Gas - Exploration &
Production) 10,300 837,737
- -------------------------------------------------------------------------------
Valeo S.A. (Automobile/Truck Parts & Tires) 15,500 955,960
- -------------------------------------------------------------------------------
13,364,900
- -------------------------------------------------------------------------------
GERMANY - 3.65%
Altana A.G. (Chemicals) 1,350 1,051,014
- -------------------------------------------------------------------------------
Commerzbank A.G. (Banking - Money Center) 29,500 749,578
- -------------------------------------------------------------------------------
Continental A.G. (Automobile/Truck Parts & Tires) 28,000 504,029
- -------------------------------------------------------------------------------
Dresdner Bank A.G. (Banking) 24,000 719,002
- -------------------------------------------------------------------------------
Hoechst A.G. (Chemicals) 27,800 1,313,400
- -------------------------------------------------------------------------------
SGL Carbon A.G. (Metals - Miscellaneous) 5,500 693,397
- -------------------------------------------------------------------------------
VEBA A.G. (Electric Power) 17,500 1,012,152
- -------------------------------------------------------------------------------
6,042,572
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
70
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HONG KONG - 7.73%
Asia Satellite Telecommunications Holdings Ltd.-ADR
(Telecommunications)(a) 17,400 $ 406,725
- -------------------------------------------------------------------------------
Cheung Kong Holdings Ltd. (Real Estate) 180,000 1,599,974
- -------------------------------------------------------------------------------
Citic Pacific Ltd. (Banking) 172,000 998,487
- -------------------------------------------------------------------------------
Cosco Pacific Ltd. (Transportation - Miscellaneous) 1,476,000 1,717,500
- -------------------------------------------------------------------------------
Dao Heng Bank Group Ltd. (Banking) 163,000 781,861
- -------------------------------------------------------------------------------
First Pacific Company Ltd. (Conglomerates) 679,368 882,752
- -------------------------------------------------------------------------------
Hang Seng Bank Ltd. (Banking) 82,400 1,001,435
- -------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. (Electric Power) 596,600 1,153,167
- -------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. - Warrants, expiring
09/30/97 (Electric Power)(a) 37,800 21,015
- -------------------------------------------------------------------------------
HSBC Holdings PLC (Banking) 67,000 1,433,641
- -------------------------------------------------------------------------------
New World Infrastructure Ltd. (Building Materials)(a) 403,000 1,177,555
- -------------------------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Real Estate) 111,600 1,367,134
- -------------------------------------------------------------------------------
Varitronix International Ltd. (Electronic
Components/Miscellaneous) 147,000 266,081
- -------------------------------------------------------------------------------
12,807,327
- -------------------------------------------------------------------------------
INDONESIA - 2.05%
PT Bank Internasional Indonesia (Banking) 1,539,809 1,515,688
- -------------------------------------------------------------------------------
PT Hanjaya Mandala Sampoerna (Tobacco) 274,000 1,461,643
- -------------------------------------------------------------------------------
PT Indosat (Telecommunications) 91,000 250,423
- -------------------------------------------------------------------------------
PT Indosat-ADR (Telecommunications) 6,400 175,200
- -------------------------------------------------------------------------------
3,402,954
- -------------------------------------------------------------------------------
IRELAND - 0.32%
Elan Corp. PLC-ADR (Medical - Drugs)(a) 16,000 532,000
- -------------------------------------------------------------------------------
ISRAEL - 0.56%
Teva Pharmaceutical Industries Ltd.-ADR (Medical -
Drugs) 18,500 929,625
- -------------------------------------------------------------------------------
ITALY - 3.35%
Edison S.p.A. (Electric Power) 121,000 762,771
- -------------------------------------------------------------------------------
Ente Nazionale Idrocarburi S.p.A. (Oil & Gas -
Exploration & Production)(a) 201,000 1,033,885
- -------------------------------------------------------------------------------
Instituto Mobiliare Italiano S.p.A. (Banking) 54,550 465,311
- -------------------------------------------------------------------------------
Parmalat Finanziaria S.p.A. (Food/Processing) 450,000 688,200
- -------------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications) 503,800 1,276,935
- -------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telecommunications) 510,000 1,324,588
- -------------------------------------------------------------------------------
5,551,690
- -------------------------------------------------------------------------------
JAPAN - 14.95%
Alpine Electronics Inc. (Electronics
Components/Miscellaneous) 45,000 718,850
- -------------------------------------------------------------------------------
Bridgestone Corp. (Automobile/Truck Parts & Tires) 69,000 1,310,768
- -------------------------------------------------------------------------------
Canon, Inc. (Office Automation) 68,000 1,503,152
- -------------------------------------------------------------------------------
Daiichi Corp. (Electronic Components/Miscellaneous) 28,700 579,898
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN - (CONTINUED)
DDI Corp. (Telecommunications) 170 $ 1,124,428
- -------------------------------------------------------------------------------
Fuji Photo Film (Electronic Components/Miscellaneous) 21,000 692,686
- -------------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobile - Manufacturers) 61,000 1,743,459
- -------------------------------------------------------------------------------
Ibiden Co., Ltd. (Building Materials) 71,000 686,642
- -------------------------------------------------------------------------------
JUSCO Co. (Retail - Stores) 35,000 1,187,721
- -------------------------------------------------------------------------------
Komatsu Ltd. (Machinery - Heavy) 131,000 1,074,605
- -------------------------------------------------------------------------------
Matsushita Electric Industrial Co. Ltd. (Electronic
Components/Miscellaneous) 57,000 930,231
- -------------------------------------------------------------------------------
Nippon Telegraph & Telephone (Telecommunications) 90 682,324
- -------------------------------------------------------------------------------
Nippon Television Network (Advertising/Broadcasting) 2,690 812,970
- -------------------------------------------------------------------------------
Nomura Securities Co. Ltd. (Finance - Asset Management) 64,000 961,575
- -------------------------------------------------------------------------------
NSK Ltd. (Metals - Miscellaneous) 100,000 606,165
- -------------------------------------------------------------------------------
NTT Data Communications Systems Co. (Computer
Software/Services) 450 1,317,244
- -------------------------------------------------------------------------------
Okuma Corp. (Machine Tools)(a) 85,000 678,180
- -------------------------------------------------------------------------------
Ricoh Corp. Ltd. (Office Automation) 108,000 1,240,307
- -------------------------------------------------------------------------------
Shizuoka Bank Ltd. (Banking) 42,000 446,075
- -------------------------------------------------------------------------------
SMC Corp. (Machinery - Miscellaneous) 10,200 686,107
- -------------------------------------------------------------------------------
Sony Corp. (Electronic Components/Miscellaneous) 19,000 1,245,229
- -------------------------------------------------------------------------------
Sumitomo Heavy Industries, Ltd. (Machinery - Heavy)(a) 267,000 811,536
- -------------------------------------------------------------------------------
TDK Corp. (Electronic Components/Miscellaneous) 21,000 1,369,053
- -------------------------------------------------------------------------------
Toyota Motor Corp. (Automobile - Manufacturers) 45,000 1,293,930
- -------------------------------------------------------------------------------
Yamatake-Honeywell Co. (Airlines) 67,000 1,081,858
- -------------------------------------------------------------------------------
24,784,993
- -------------------------------------------------------------------------------
MALAYSIA - 1.74%
Commerce Asset Holding Berhad (Finance - Asset
Management) 110,000 827,559
- -------------------------------------------------------------------------------
Edaran Otomobil Nasional Berhad (Automobile -
Manufacturers) 61,000 609,879
- -------------------------------------------------------------------------------
Malayan Banking Berhad (Banking) 103,000 1,141,952
- -------------------------------------------------------------------------------
YTL Corp. Berhad (Engineering & Construction) 57,000 306,949
- -------------------------------------------------------------------------------
2,886,339
- -------------------------------------------------------------------------------
MEXICO - 1.76%
Grupo Industrial Maseca S.A. de CV - Class B
(Food/Processing) 945,000 1,211,912
- -------------------------------------------------------------------------------
Grupo Televisa S.A. - GDR (Advertising/Broadcasting)(a) 31,000 794,375
- -------------------------------------------------------------------------------
Panamerican Beverages, Inc. - Class A (Beverages - Soft
Drinks) 19,500 914,063
- -------------------------------------------------------------------------------
2,920,350
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
71
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS - 5.05%
Akzo Nobel N.V. (Conglomerates) 4,900 $ 669,794
- -------------------------------------------------------------------------------
Elsevier N.V. (Publishing) 38,000 642,687
- -------------------------------------------------------------------------------
Getronics N.V. (Computer Software/Services) 29,200 793,212
- -------------------------------------------------------------------------------
Gucci Group NV-ADR (Textiles) 9,000 574,875
- -------------------------------------------------------------------------------
Koninklijke Ahold N.V. (Retail - Food & Drug) 19,000 1,188,532
- -------------------------------------------------------------------------------
Nutricia Verenigde Bedrijven N.V. (Food/Processing) 8,700 1,322,763
- -------------------------------------------------------------------------------
Oce-Van Der Grinten N.V. (Office Automation) 6,300 684,552
- -------------------------------------------------------------------------------
Royal Dutch Petroleum Co. (Oil & Gas - Services) 5,300 929,841
- -------------------------------------------------------------------------------
VNU-Verenigde Nederlandse Uitgeversbedrijven Verenigd
Bezit (Publishing) 32,500 679,554
- -------------------------------------------------------------------------------
Wolters Kluwer N.V. (Publishing) 6,590 875,995
- -------------------------------------------------------------------------------
8,361,805
- -------------------------------------------------------------------------------
NORWAY - 0.27%
Storebrand A.S.A. (Insurance - Multi-Line Property)(a) 77,000 442,178
- -------------------------------------------------------------------------------
PHILIPPINES - 2.50%
C & P Homes, Inc. (Home Building) 1,930,000 990,685
- -------------------------------------------------------------------------------
Filinvest Land Inc. (Real Estate)(a) 2,146,450 669,235
- -------------------------------------------------------------------------------
Metro Pacific Corp. (Conglomerates) 3,568,000 881,825
- -------------------------------------------------------------------------------
Metropolitan Bank & Trust Co. (Banking) 31,300 773,574
- -------------------------------------------------------------------------------
Philippine Long Distance Telephone Co.
(Telecommunications) 8,330 457,675
- -------------------------------------------------------------------------------
Philippine Long Distance Telephone Co.-ADR
(Telecommunications) 1,400 71,400
- -------------------------------------------------------------------------------
Southeast Asia Cement Holdings, Inc. (Building
Materials)(a) 2,628,800 304,861
- -------------------------------------------------------------------------------
4,149,255
- -------------------------------------------------------------------------------
PORTUGAL - 0.32%
Portugal Telecom S.A. (Telecommunications)(a) 18,600 530,229
- -------------------------------------------------------------------------------
SINGAPORE - 2.32%
City Developments Ltd. (Real Estate) 113,000 1,017,509
- -------------------------------------------------------------------------------
DBS Land Ltd. (Real Estate) 280,000 1,030,515
- -------------------------------------------------------------------------------
Overseas Union Bank Ltd. (Banking) 151,000 1,165,440
- -------------------------------------------------------------------------------
Total Access Communication PLC (Telecommunications) 92,000 634,800
- -------------------------------------------------------------------------------
3,848,264
- -------------------------------------------------------------------------------
SOUTH AFRICA - 0.76%
De Beers Centenary A.G. (Gold & Silver Mining) 19,500 558,512
- -------------------------------------------------------------------------------
Sasol Ltd. (Oil & Gas - Exploration & Production) 58,550 694,566
- -------------------------------------------------------------------------------
1,253,078
- -------------------------------------------------------------------------------
SPAIN - 2.75%
Empresa Nacional de Electricidad, S.A. (Electric Power) 16,000 1,138,764
- -------------------------------------------------------------------------------
Gas Natural SDG, S.A. (Gas Distribution) 4,000 930,483
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SPAIN - (CONTINUED)
Iberdrola S.A. (Electric Power) 83,800 $ 1,187,691
- -------------------------------------------------------------------------------
Telefonica de Espana (Telecommunications) 56,000 1,300,520
- -------------------------------------------------------------------------------
4,557,458
- -------------------------------------------------------------------------------
SWEDEN - 2.62%
Astra A.B. (Medical - Drugs) 7,300 352,161
- -------------------------------------------------------------------------------
Autoliv A.B. (Automobile/Truck Parts & Tires) 39,200 1,718,618
- -------------------------------------------------------------------------------
Hennes & Mauritz A.B. - B Shares (Retail - Stores) 7,400 1,024,297
- -------------------------------------------------------------------------------
Securitas A.B. - Class B (Security & Safety Services) 27,900 812,057
- -------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Telecommunications) 14,280 431,077
- -------------------------------------------------------------------------------
4,338,210
- -------------------------------------------------------------------------------
SWITZERLAND - 0.75%
Novartis (Medical - Drugs)(a) 1,083 1,240,716
- -------------------------------------------------------------------------------
THAILAND - 0.49%
Bank of Ayudhya Public Co., Ltd. (Banking) 12,600 29,724
- -------------------------------------------------------------------------------
Krung Thai Bank Public Co. Ltd. (Banking) 152,130 293,630
- -------------------------------------------------------------------------------
Siam Commercial Bank PLC (Banking) 37,300 270,522
- -------------------------------------------------------------------------------
Thai Farmers Bank PLC (Banking) 35,000 218,357
- -------------------------------------------------------------------------------
Thai Farmers Bank PLC-Warrants, expiring 09/15/02
(Banking)(a) 7,163 6,773
- -------------------------------------------------------------------------------
819,006
- -------------------------------------------------------------------------------
UNITED KINGDOM - 17.28%
Airtours PLC (Leisure & Recreation) 45,150 630,414
- -------------------------------------------------------------------------------
Argos PLC (Retail - Stores) 63,466 835,594
- -------------------------------------------------------------------------------
Barclays PLC (Finance - Consumer Credit) 49,000 841,151
- -------------------------------------------------------------------------------
Bass PLC (Beverages - Alcoholic) 37,000 520,422
- -------------------------------------------------------------------------------
B.A.T. Industries PLC (Conglomerates) 126,000 1,046,942
- -------------------------------------------------------------------------------
British Aerospace PLC (Aerospace/Defense) 42,000 921,021
- -------------------------------------------------------------------------------
British Petroleum Co. PLC (Oil & Gas - Services) 117,000 1,404,120
- -------------------------------------------------------------------------------
Burton Group PLC (Retail - Stores) 367,200 981,381
- -------------------------------------------------------------------------------
Caradon PLC (Building Materials) 180,000 737,023
- -------------------------------------------------------------------------------
Compass Group PLC (Restaurants) 78,000 828,508
- -------------------------------------------------------------------------------
Dixons Group PLC (Retail - Stores) 118,000 1,097,721
- -------------------------------------------------------------------------------
EMAP PLC (Publishing) 62,500 788,611
- -------------------------------------------------------------------------------
FKI PLC (Conglomerates) 112,000 387,596
- -------------------------------------------------------------------------------
General Electric Co. PLC (Electronic
Components/Miscellaneous) 110,000 721,775
- -------------------------------------------------------------------------------
GKN PLC (Automobile/Truck Parts & Tires) 50,000 857,461
- -------------------------------------------------------------------------------
Granada Group PLC (Leisure & Recreation) 78,000 1,153,229
- -------------------------------------------------------------------------------
Kingfisher PLC (Retail - Stores) 32,400 351,921
- -------------------------------------------------------------------------------
Ladbroke Group PLC (Hotels/Motels) 231,000 914,185
- -------------------------------------------------------------------------------
LucasVarity PLC (Automobile/Truck Parts & Tires)(a) 126,900 483,729
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
72
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM - (CONTINUED)
Marks & Spencer PLC (Retail - Stores) 83,000 $ 698,184
- -------------------------------------------------------------------------------
Medeva PLC (Medical - Drugs) 147,000 647,233
- -------------------------------------------------------------------------------
MFI Furniture Group PLC (Retail - Stores) 230,000 732,911
- -------------------------------------------------------------------------------
Next PLC (Retail - Stores) 97,500 947,940
- -------------------------------------------------------------------------------
NFC PLC (Transportation - Miscellaneous) 235,000 742,805
- -------------------------------------------------------------------------------
Peninsular & Oriental Steam Navigation Co.
(Transportation - Miscellaneous) 72,000 727,771
- -------------------------------------------------------------------------------
Provident Financial PLC (Finance - Consumer Credit) 92,800 802,878
- -------------------------------------------------------------------------------
Railtrack Group PLC (Railroads) 145,000 962,609
- -------------------------------------------------------------------------------
Rentokil Initial PLC (Business Services) 94,000 710,194
- -------------------------------------------------------------------------------
Scottish & Newcastle PLC (Beverages - Alcoholic) 73,000 858,566
- -------------------------------------------------------------------------------
Siebe PLC (Electronic Components/Miscellaneous) 38,000 705,705
- -------------------------------------------------------------------------------
Smiths Industries PLC (Electronics/Defense) 53,500 735,087
- -------------------------------------------------------------------------------
Standard Chartered PLC (Finance - Asset Management) 63,100 779,426
- -------------------------------------------------------------------------------
Unilever PLC (Consumer Non-Durables) 52,000 1,261,915
- -------------------------------------------------------------------------------
Vodafone Group PLC (Telecommunications) 185,000 782,851
- -------------------------------------------------------------------------------
WPP Group PLC (Advertising/Broadcasting) 240,000 1,040,260
- -------------------------------------------------------------------------------
28,639,139
- -------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 153,095,026
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(b) VALUE
<S> <C> <C>
FOREIGN CONVERTIBLE BONDS - 0.68%
ITALY - 0.45%
Pirelli S.p.A. (Automobile/Truck Parts &
Tires), Conv. Bonds, 5.00%, 12/31/98 ITL 1,007,349,200 $ 732,105
- -------------------------------------------------------------------------------
JAPAN - 0.23%
Ricoh Co., Ltd. (Office Automation), Conv.
Bonds, 0.35%, 03/31/03 JPY 40,000,000 386,253
- -------------------------------------------------------------------------------
Total Foreign Convertible Bonds 1,118,358
- -------------------------------------------------------------------------------
NON-CONVERTIBLE BONDS - 0.12%
ITALY - 0.12%
Metropolitan Bank & Trust International Finance
Ltd. (Banking - Foreign), Conv. Deb., 2.75%,
09/10/00 155,000 205,375
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 5.72%(c)
Daiwa Securities America Inc., 6.25%,
01/02/97(d) 9,477,779 9,477,779
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 98.89% 163,896,538
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.11% 1,841,540
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $165,738,078
===============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Principal in U.S. Dollar unless otherwise indicated.
(c) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
GDR - Global Depository Receipt
ITL - Italian Lira
JPY - Japanese Yen
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
73
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $135,587,806) $163,896,538
- ----------------------------------------------------------------------
Foreign currencies, at market value (cost $1,784,804) 1,779,584
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 220,105
- ----------------------------------------------------------------------
Investments sold 59,428
- ----------------------------------------------------------------------
Dividends and interest 251,370
- ----------------------------------------------------------------------
Organizational costs, net 3,856
- ----------------------------------------------------------------------
Investment for deferred compensation plan 11,965
- ----------------------------------------------------------------------
Other assets 711
- ----------------------------------------------------------------------
Total assets 166,223,557
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 13,019
- ----------------------------------------------------------------------
Investments purchased 295,262
- ----------------------------------------------------------------------
Deferred compensation plan 11,965
- ----------------------------------------------------------------------
Accrued advisory fees 101,585
- ----------------------------------------------------------------------
Accrued directors' fees 1,609
- ----------------------------------------------------------------------
Accrued administrative services fees 5,238
- ----------------------------------------------------------------------
Accrued operating expenses 56,801
- ----------------------------------------------------------------------
Total liabilities 485,479
- ----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $165,738,078
======================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 10,129,698
======================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $16.36
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $276,213 foreign withholding tax) $ 1,747,006
- ---------------------------------------------------------------------------
Interest 403,832
- ---------------------------------------------------------------------------
Total investment income 2,150,838
- ---------------------------------------------------------------------------
EXPENSES:
Advisory fees 924,578
- ---------------------------------------------------------------------------
Custodian fees 151,693
- ---------------------------------------------------------------------------
Administrative services fees 58,644
- ---------------------------------------------------------------------------
Directors' fees and expenses 6,770
- ---------------------------------------------------------------------------
Organizational costs 2,892
- ---------------------------------------------------------------------------
Other 43,391
- ---------------------------------------------------------------------------
Total expenses 1,187,968
- ---------------------------------------------------------------------------
Net investment income 962,870
- ---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investment securities 4,411,281
- ---------------------------------------------------------------------------
Foreign currency transactions (22,907)
- ---------------------------------------------------------------------------
4,388,374
- ---------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities 17,077,175
- ---------------------------------------------------------------------------
Foreign currencies (5,602)
- ---------------------------------------------------------------------------
17,071,573
- ---------------------------------------------------------------------------
Net gain on investment securities and foreign currencies 21,459,947
- ---------------------------------------------------------------------------
Net increase in net assets resulting from operations $22,422,817
===========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
74
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 962,870 $ 457,524
- -----------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities and foreign currency transactions 4,388,374 (107,659)
- -----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities and foreign currencies 17,071,573 13,454,304
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 22,422,817 13,804,169
- -----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (377,734) (123,270)
- -----------------------------------------------------------------------------
Net increase from capital stock transactions 61,436,140 13,556,877
- -----------------------------------------------------------------------------
Net increase in net assets 83,481,223 27,237,776
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 82,256,855 55,019,079
- -----------------------------------------------------------------------------
End of period $165,738,078 $82,256,855
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $133,188,811 $71,752,671
- -----------------------------------------------------------------------------
Undistributed net investment income 937,128 374,899
- -----------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign currency
transactions 3,305,038 (1,106,243)
- -----------------------------------------------------------------------------
Unrealized appreciation of investment securities
and foreign currencies 28,307,101 11,235,528
- -----------------------------------------------------------------------------
$165,738,078 $82,256,855
=============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to AIM V.I. International Equity Fund (the "Fund"). The Fund's investment
objective is to seek to provide long-term growth of capital by investing in a
diversified portfolio of international equity securities the issuers of which
are considered by AIM to have strong earnings momentum. Currently, shares of
the Fund are sold only to insurance company separate accounts to fund the
benefits of variable annuity contracts and variable life insurance policies.
The following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at the last sales price on the exchange on
which the security is traded or, lacking any sales, at the mean between the
closing bid and asked prices on the day of valuation. If a mean is not
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales prices. Securities traded in the over-the-counter
market are valued at the mean between the closing bid and asked prices on
valuation date. Securities for which market quotations are either not
readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors.
Debt obligations are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by
AIM V.I. INTERNATIONAL EQUITY FUND
75
<PAGE>
any of the above methods are valued at the mean between last bid and asked
prices based upon quotes furnished by independent sources. Investments with
maturities of 60 days or less are valued on the basis of amortized cost which
approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Directors.
B. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
C. Foreign Currency Contracts - A forward currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a forward currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
D. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on an accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On December 31, 1996,
undistributed net investment income was reduced by $22,907 and
undistributed net realized gains increased by $22,907 in order to comply
with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
E. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
F. Organizational Costs - Organizational costs of $14,461 are being amortized
over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.75% of
the first $250 million of the Fund's average daily net assets, plus 0.70% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1996, AIM was reimbursed $58,644 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1996, the Fund incurred legal fees of
$3,038 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1996 was $126,478,982 and $67,602,207, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $31,818,972
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (3,535,477)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $28,283,495
==========================================================================
</TABLE>
Cost of investments for tax purposes is $135,613,043.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold 4,432,824 $66,189,679 1,612,585 $20,607,902
- --------------------------------------------------------------------------
Issued as reinvestment of
distributions 23,877 377,734 9,199 123,270
- --------------------------------------------------------------------------
Reacquired (347,543) (5,131,273) (591,239) (7,174,295)
- --------------------------------------------------------------------------
4,109,158 $61,436,140 1,030,545 $13,556,877
==========================================================================
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
76
<PAGE>
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, the eleven months ended December 31,
1995, the year ended January 31, 1995 and the period May 5, 1993 (date
operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
-------------------- -------------------
1996 1995 1995 1994
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 13.66 $ 11.03 $ 12.49 $ 10.00
- --------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.07 0.07 0.06 --
- --------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 2.67 2.58 (1.49) 2.49
- --------------------------------------------------------------------------------
Total from investment
operations 2.74 2.65 (1.43) 2.49
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.04) (0.02) (0.03) --
- --------------------------------------------------------------------------------
Net asset value, end of
period $ 16.36 $ 13.66 $ 11.03 $ 12.49
================================================================================
Total return(a) 20.05% 24.04% (11.48)% 24.90%
================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $165,738 $82,257 $55,019 $23,533
================================================================================
Ratio of expenses to
average net assets 0.96%(b) 1.15%(c) 1.27%(d) 1.98%(c)(e)
================================================================================
Ratio of net investment
income to average net
assets 0.78%(b) 0.75%(c) 0.60%(d) (0.15)%(c)(e)
================================================================================
Portfolio turnover rate 59% 67% 64% 26%
================================================================================
Average broker commission
rate(f) $ 0.0209 N/A N/A N/A
================================================================================
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $123,199,030.
(c) Annualized.
(d) Ratios of expenses and net investment income to average net assets prior
to waiver of advisory fees are 1.28% and 0.59%, respectively.
(e) Annualized ratios of expenses and net investment income (loss) to average
net assets prior to waiver of advisory fees are 3.06% and (1.23)%,
respectively.
(f) Disclosure requirement beginning with the Fund's fiscal year ended
December 31, 1996.
NOTE 7 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. INTERNATIONAL EQUITY FUND
77
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. International Equity Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1996, the related statement of operations for the year then
ended, the statement of changes in net assets for the year then ended and for
the eleven month period ended December 31, 1995 and the financial highlights
for the year then ended, the eleven month period ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (commencement of
operations) through January 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian and
brokers. Where brokers did not reply to our confirmation requests, we carried
out other appropriate auditing procedures. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. International Equity Fund, as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and for the eleven month period ended December 31, 1995 and the
financial highlights for the year then ended, the eleven month period ended
December 31, 1995, the year ended January 31, 1995 and the period May 5, 1993
through January 31, 1994 (commencement of operations), in conformity with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. INTERNATIONAL EQUITY FUND
78
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
MONEY MARKET FUNDS OFFER
STABILITY IN VOLATILE 1996
A roundtable discussion with the Fund management team for AIM Money Market
Fund for the fiscal year ended December 31, 1996.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. THE BIG NEWS IN 1996 WAS THE ADVANCING downturn. For the rest of 1996, the Fed's ---------------------
STOCK MARKET--MONEY MARKETS SEEMED QUIET BY monetary policy remained unaltered.
COMPARISON. HOW DID AIM V.I. MONEY MARKET Short-term securities are most affected Analysts suggest that
FUND PERFORM DURING THE REPORTING PERIOD? by Fed policy. Besides a temporary spike
to 5.28% in the first quarter of 1996 in economic growth
A. For money market securities, no news anticipation of further Fed tightening,
was good news. Stocks delivered another money market yields ranged near 4.85% no greater than 3%
record-breaking performance in 1996, for most of the year. Compared to the
but stock and bond performance for the dramatic volatility in long-term financial and inflation at less than 3.5%
year was marked by intense volatility. markets that marked most of 1996,
Money market securities, by comparison, money market securities offered valuable imply that the Fed need not
had a rather uneventful year. Yields on liquidity and stability.
most money market securities closed tighten aggressively, if at all.
1996 very near 1995 levels. Q. WHY WERE LONG-TERM ASSETS SO
Given the stable environment for money VOLATILE? ---------------------
market securities, the Fund's management
team maintained the weighted average A. Early in March, financial markets were advance and then decline in market
maturity of the portfolio in the 25-to-30- stunned by economic reports that re- yields over the course of 1996 led one
day range, slightly lower than the 34-day vealed the economy was growing with market strategist to dub it "a round-
level at the beginning of the reporting surprising strength, which could lead to trip year."
period. At the close of the fiscal year, rising inflation. That sent stock and
the seven-day yield was 4.95%, near the bond prices tumbling as markets attempted Q. WHAT IS THE MARKET OUTLOOK FOR
4.85% average seven-day compound yield to anticipate whether the Fed would choose 1997?
that similar money funds produced for to boost interest rates to reign in an
most of 1996, according to IBC's Money over-heating economy. A. At the close of 1996, economic
Fund Report. Bonds were hardest hit. From 4.97% at growth appeared to have settled at an
the beginning of the fiscal year, the yield annual rate of 2.5%. Inflation,
Q. WHY WERE MONEY MARKET SECURITIES on the three-month U.S. Treasury bill rose likewise, continues to be mild.
RELATIVELY STABLE IN 1996? to 5.36% on September 5--its high for Going forward, analysts suggest
the year. At longer maturities, yields rose that economic growth no greater than
A. The key was a calm interest rate envi- more than 100 basis points. (A basis 3% and inflation at less than 3.5%
ronment for short-term securities. The point is 1/100 of one percent.) imply that the Fed need not tighten
Federal Reserve Board changed short-term Bonds began to recover in the fall when aggressively, if at all. Nothing
interests rates only once during the it became apparent that economic growth more than a 50 basis point hike of
year. In January 1996, it lowered the was moderate and without rising inflation, the federal funds rate may be
federal funds rate, which acts as a target but their performance for the year was necessary for containing inflation.
for other interest rates, to 5.25%, when it still disappointing. The yield on the three- That would suggest continuing
seemed the economy was headed for a month U.S. Treasury bill retreated to stability for money market
5.16% by the end of fiscal year. The instruments.
An investment in the Fund is neither insured nor guaranteed by the U.S. government, and there can be no assurance that the Fund will
be able to maintain a stable net asset value of $1.00 per share.
</TABLE>
AIM V.I. MONEY MARKET FUND
79
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Par (000) VALUE
<S> <C> <C>
COMMERCIAL PAPER - 51.85%(a)
ASSET-BACKED SECURITIES - 24.19%
Asset Securitization Cooperative Corp.,
5.32%, 01/17/97 $3,165 $ 3,157,517
- --------------------------------------------------------------------
Delaware Funding Corp.,
5.34%, 01/31/97 2,292 2,281,801
- --------------------------------------------------------------------
Monte Rosa Capital Corp.
5.50%, 01/22/97 1,000 996,792
- --------------------------------------------------------------------
5.36%, 03/12/97 2,000 1,979,156
- --------------------------------------------------------------------
Preferred Receivables Funding Corp.,
5.37%, 02/05/97 900 895,301
- --------------------------------------------------------------------
Receivables Capital Corp.,
5.43%, 01/16/97 3,069 3,062,056
- --------------------------------------------------------------------
Sheffield Receivables Corp.,
5.32%, 01/09/97 3,000 2,996,453
- --------------------------------------------------------------------
15,369,076
- --------------------------------------------------------------------
AUTOMOBILE - 4.68%
Ford Motor Credit Co.,
5.32%, 02/27/97 3,000 2,974,730
- --------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 4.70%
Merrill Lynch & Co., Inc.,
5.35%, 02/04/97 3,000 2,984,842
- --------------------------------------------------------------------
CHEMICALS - 3.89%
Bayer Corp.,
5.37%, 03/17/97 2,500 2,472,031
- --------------------------------------------------------------------
COMPUTERS & OFFICE EQUIPMENT - 5.00%
Electronic Data Systems Corp.,
5.30%, 02/18/97 3,200 3,177,387
- --------------------------------------------------------------------
ENTERTAINMENT - 1.55%
Walt Disney Co. (The),
5.31%, 03/31/97 1,000 986,872
- --------------------------------------------------------------------
FINANCE (MISCELLANEOUS) - 3.12%
BTR Dunlop Finance Inc.,
5.33%, 03/06/97 1,000 990,524
- --------------------------------------------------------------------
International Lease Finance Corp.,
5.31%, 03/04/97 1,000 990,855
- --------------------------------------------------------------------
1,981,379
- --------------------------------------------------------------------
PUBLISHING - 4.72%
Donnelley (R.R.) & Sons Co.,
5.32%, 01/13/97 3,000 2,994,680
- --------------------------------------------------------------------
Total Commercial Paper 32,940,997
- --------------------------------------------------------------------
MEDIUM-TERM NOTE - 4.72%
FINANCE (BUSINESS CREDIT) - 4.72%
CIT Group Holdings (The), Inc.,
5.61%, 03/19/97(b) 3,000 2,999,574
- --------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 3.94%
Federal National Mortgage Association - 3.15%
5.29%, 06/02/99(c) 2,000 2,000,000
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Par (000) VALUE
<S> <C> <C>
Student Loan Marketing Association - 0.79%
5.24%, 08/20/98(c) $500 $ 499,944
- -----------------------------------------------------------------------------
Total U.S. Government Agency Securities 2,499,944
- -----------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 14.17%
Citicorp Securities, Inc.,
7.25%, 01/27/97(d) 3,000 3,000,000
- -----------------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.,
5.563%, 04/07/97(e) 3,000 3,000,000
- -----------------------------------------------------------------------------
Morgan Stanley Group Inc.,
7.10%, 05/28/97(d) 3,000 3,000,000
- -----------------------------------------------------------------------------
Total Master Note Agreements 9,000,000
- -----------------------------------------------------------------------------
PROMISSORY NOTE AGREEMENT - 4.72%
Goldman, Sachs & Co.,
7.13%, 04/23/97 3,000 3,000,000
- -----------------------------------------------------------------------------
Total Investments, excluding Repurchase Agreements 50,440,515
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 20.39%(f)
Daiwa Securities America Inc.,
6.25%, 01/02/97(g) 9,121 9,120,800
- -----------------------------------------------------------------------------
Dresdner Securities (USA), Inc.,
7.05%, 01/02/97(h) 3,833 3,833,494
- -----------------------------------------------------------------------------
Total Repurchase Agreements 12,954,294
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.79% 63,394,809(i)
- -----------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.21% 134,684
- -----------------------------------------------------------------------------
NET ASSETS - 100.00% $63,529,493
=============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Some commercial paper is traded on a discount basis. In such cases, the
interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(b) Interest rates are redetermined daily. Rates shown are in effect for
period ending December 31, 1996.
(c) Interest rates are redetermined weekly. Rates shown are in effect for the
period ending December 31, 1996.
(d) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon 3 business days' notice to the issuer.
Interest rates on master notes are redetermined periodically. Rate shown
is the rate in effect on December 31, 1996.
(e) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon 7 days' notice to the issuer. Interest rates
on master notes are redetermined periodically. Rate shown is the rate in
effect on December 31, 1996.
(f) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(g) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
(h) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$100,039,167. Collateralized by $136,515,003 U.S. Treasury obligations, 0%
to 9.00% due 01/01/09 to 08/01/34.
(i) Also represents cost for income tax purposes.
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
80
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
ASSETS:
<S> <C>
Investments, excluding repurchase agreements, at value (amortized
cost) $ 50,440,515
- -------------------------------------------------------------------------------
Repurchase agreements 12,954,294
- -------------------------------------------------------------------------------
Receivables for:
Capital stock sold 85,058
- -------------------------------------------------------------------------------
Interest 76,453
- -------------------------------------------------------------------------------
Organizational costs, net 3,856
- -------------------------------------------------------------------------------
Investment for deferred compensation plan 11,716
- -------------------------------------------------------------------------------
Other assets 438
- -------------------------------------------------------------------------------
Total assets 63,572,330
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for deferred compensation plan 11,716
- -------------------------------------------------------------------------------
Accrued advisory fees 21,466
- -------------------------------------------------------------------------------
Accrued administrative service fees 3,462
- -------------------------------------------------------------------------------
Accrued directors' fees 1,755
- -------------------------------------------------------------------------------
Accrued operating expenses 4,438
- -------------------------------------------------------------------------------
Total liabilities 42,837
- -------------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 63,529,493
===============================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- -------------------------------------------------------------------------------
Outstanding 63,529,436
===============================================================================
Net asset value, offering and redemption price per share $ 1.00
===============================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $3,570,828
- -------------------------------------------------------------------------------
EXPENSES:
Advisory fees 264,855
- -------------------------------------------------------------------------------
Custodian fees 23,908
- -------------------------------------------------------------------------------
Administrative services fees 29,412
- -------------------------------------------------------------------------------
Directors' fees and expenses 7,960
- -------------------------------------------------------------------------------
Organizational costs 2,892
- -------------------------------------------------------------------------------
Other 34,326
- -------------------------------------------------------------------------------
Total expenses 363,353
- -------------------------------------------------------------------------------
Net investment income 3,207,475
- -------------------------------------------------------------------------------
Net realized gain on sales of investment securities 16,294
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,223,769
===============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
81
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,207,475 $ 2,278,242
- ------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities 16,294 (17,141)
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 3,223,769 2,261,101
- ------------------------------------------------------------------------------
Net increase (decrease) from capital stock
transactions (1,992,555) 34,506,043
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (3,207,475) (2,278,242)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets (1,976,261) 34,488,902
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 65,505,754 31,016,852
- ------------------------------------------------------------------------------
End of period $63,529,493 $65,505,754
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $63,529,436 $65,521,991
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities 57 (16,237)
- ------------------------------------------------------------------------------
$63,529,493 $65,505,754
==============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Money Market Fund (the "Fund"). The Fund's investment
objective is to seek to provide as high a level of current income as is
consistent with the preservation of capital and liquidity. Currently, shares
of the Fund are sold only to insurance company separate accounts to fund the
benefits of variable annuity contracts and variable life insurance policies.
The following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - The Fund invests only in securities which have
maturities of 397 days or less from the date of purchase. The securities
are valued on the basis of amortized cost which approximates market value.
This method values a security at its cost on the date of purchase and
thereafter, assumes a constant amortization to maturity of any discount or
premiums.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income,
adjusted for amortization of premiums and discounts on investments, is
recorded as earned from settlement date and is recorded on the accrual
basis. Distributions to shareholders are declared and paid daily. Realized
gains or losses from securities transactions are recorded on the identified
cost basis.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements. The Fund has a
capital loss carryforward (which may be carried forward to offset future
taxable gains, if any) of $846 which expires, if not previously utilized,
in the year 2003. The Fund cannot distribute capital gains to shareholders
until the tax loss carryforwards have been utilized.
D. Organizational Costs - Organizational costs of $14,461 are being amortized
over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.40% of
the first $250 million of the Fund's average daily net assets, plus 0.35% of
the Fund's average daily net assets in excess of $250 million.
AIM V.I. MONEY MARKET FUND
82
<PAGE>
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1996, AIM was reimbursed $29,412 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1996, the Fund incurred legal fees of
$2,950 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest directors' fees,
if so elected by a director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold 76,145,573 $ 76,145,573 80,119,672 $ 80,119,672
- ---------------------- ----------- ------------ ----------- ------------
Issued as reinvestment
of distributions 3,207,475 3,207,475 2,278,242 2,278,242
- ---------------------- ----------- ------------ ----------- ------------
Reacquired (81,345,603) (81,345,603) (47,891,871) (47,891,871)
- ---------------------- ----------- ------------ ----------- ------------
(1,992,555) $ (1,992,555) 34,506,043 $ 34,506,043
=========== ============ =========== ============
</TABLE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, the eleven months ended December 31,
1995, the year ended January 31, 1995 and the period May 5, 1993 (date
operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------- -------------------
1996 1995 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.05 0.05 0.04 0.02
- -------------------------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.04) (0.02)
- -------------------------- ------- ------- ------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------- ======= ======= ======= =======
Total return 4.97% 5.69%(a) 3.98% 2.27%(a)
- -------------------------- ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $63,529 $65,506 $31,017 $13,891
- -------------------------- ======= ======= ======= =======
Ratio of expenses to
average net assets 0.55%(b) 0.53%(a) 0.63%(c) 0.95%(a)(d)
- -------------------------- ======= ======= ======= =======
Ratio of net investment
income to average net
assets 4.84%(b) 5.40%(a) 4.14%(c) 2.29%(a)(d)
- -------------------------- ======= ======= ======= =======
</TABLE>
(a) Annualized.
(b) Ratios are based on average net assets of $66,213,747.
(c) Ratios of expenses and net investment income to average net assets prior
to waiver of advisory fees are 0.70% and 4.07%, respectively.
(d) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees are 1.53% and 1.70%, respectively.
NOTE 6 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. MONEY MARKET FUND
83
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Money Market Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1996, the related statement of operations for the year then ended, the
statement of changes in net assets for the year then ended and the eleven
month period ended December 31, 1995 and the financial highlights for the year
then ended, the eleven month period ended December 31, 1995, the year ended
January 31, 1995 and the period May 5, 1993 (commencement of operations)
through January 31, 1994. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amount and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Money Market Fund, as of December 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for the year then ended
and the eleven month period ended December 31, 1995 and the financial
highlights for the year then ended, the eleven month period ended December 31,
1995, the year ended January 31, 1995 and the period May 5, 1993 (commencement
of operations) through January 31, 1994, in conformity with generally accepted
accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. MONEY MARKET FUND
84
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
HIGH-VALUE MARKET LEADS TO PORTFOLIO
CHANGES, IMPROVING PERFORMANCE
A roundtable discussion with the Fund management team for AIM V.I. Value Fund
for the fiscal year ended December 31, 1996.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID AIM V.I. VALUE FUND by the fact that at times during Top 10 Holdings
PERFORM DURING THE FISCAL YEAR? the reporting period more than As of 12/31/96
A: It was a tough year for the 20% of the portfolio's assets were in
bargain-hunting value funds as cash or short-term cash equivalent 1. Federal National Mortgage Association
stocks continued to rise to re- securities. As the fiscal year pro- 2. Columbia/HCA Healthcare Corp.
cord-breaking levels in 1996. gressed, we relaxed a little, with 3. Baxter International Inc.
Still, the Fund managed to de- about 14% of assets in cash when the 4. Philip Morris Companies, Inc.
liver a respectable total re- fiscal year closed. 5. MFS Communications Co., Inc.
turn for the period of 15.02%. We also participated in what is 6. Bristol-Myers Squibb Co.
known as a "flight to quality" 7. SmithKline Beecham plc-ADR
Q. WHAT MADE THE MARKET SO CHAL- occurring in the market. With stock 8. Ameritech Corp.
LENGING DURING 1996? values at heady levels, investors be- 9. Canadian Pacific Ltd.
A. The stock market was unusually gan to favor steady-growing blue-chips 10. MedPartners, Inc.
generous to investors the past two over more volatile, less familiar stocks.
years. The Standard & Poor's Com- As the reporting period closed, the Fund Please keep in mind that the Fund's
posite Index of 500 Stocks (S&P was anchored in less-cyclical stocks with portfolio composition is subject to
500) rose a dramatic 37.45% during more predictable earnings. change and there is no assurance the Fund
1995, and during 1996 it advanced will continue to hold any particular
another 22.95%. Such substantial Q. WERE THERE ANY OTHER STEPS YOU TOOK security.
investment returns two years in a IN RESPONSE TO A DIFFICULT MARKET?
row is unusual. As stock prices A. In selected cases, we established
continued to rise, it was more larger-than-usual positions in stocks grow and produce attractive investment
difficult to find the kind of under- we thought attractive. As of December 31, opportunities for the foreseeable future.
priced stocks the Fund seeks for 1996, the Fund had 175 holdings spread An aging population is bound to produce
its portfolio. across 51 industry categories. continued demand. A new federal initia-
We concentrated on companies expected tive in the health-care area seems un-
Q. HOW DID YOU MANAGE THE FUND IN to meet earnings predictions, and that con- likely, which creates a more certain
THAT ENVIRONMENT? tributed to improved performance. The top environment in the industry.
A. We became quite conservative in 10 holdings in the portfolio included com- Finally, health-care companies have
executing our value-oriented invest- panies with long-term records of consistent made enormous strides in cost control
ment style. The Fund looks for what performance like Baxter International Inc., and increased efficiency through con-
we often call growth at a discount: Bristol Myers Squibb Co., and SmithKline solidation in recent years. One of our
we try to identify companies with Beecham plc. largest holdings, Columbia/HCA HealthCare
healthy earnings growth expectations Corp.,
whose stocks are commanding a lower Q. THE COMPANIES YOU JUST MENTIONED ARE
price than we think justifiable. IN THE MEDICAL/PHARMACEUTICAL AREA. IS
In a expensive market, such stocks THE FUND HEAVILY INVESTED THERE?
are hard to find. A. Yes. Companies such as pharmaceutical
We adhered to our standards by not manufacturers, patient-care providers, and
buying securities we considered too makers of medical instruments and products
expensive and by trying to manage accounted for nearly 20% of portfolio assets
risk in a market characterized by at the close of the fiscal year.
short-term volatility. Our conserva- A number of factors suggest that the
tive stance is evidenced health-care industry should continue to
</TABLE>
AIM V.I. VALUE FUND
85
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
has been a leader of the consolidation PORTION THAN USUAL. HAVE THESE relatively constant whatever the state
wave sweeping that industry. At the INVESTMENTS BEEN SUCCESSFUL? of the economy. Our holdings of such
close of the fiscal year, patient-care A. Yes, they have, particularly the food processors as Archer Daniels Midland
providers like Columbia/HCA comprised European stocks, which on average de- and Nabisco Holdings Corp. rose from just
61% of the portfolio. livered a hefty 20% return during 1996. over 1% of the portfolio to slightly more
Drug makers-- which accounted for We gradually reduced our holdings in than 3% during the fiscal year.
9% of the portfolio-have benefited Japan, where economic recovery seems to
from increased use of prescription be stalled. Q. WHAT IS YOUR OUTLOOK FOR THE MARKET
drugs by Medicare recipients enrolled IN 1997?
in managed care; such holdings as Q. IN WHAT OTHER AREAS DID THE FUND FIND A. Forecasts of stock market performance
Bristol-Myers Squibb and SmithKline INVESTMENT OPPORTUNITIES? in 1997 are all over the block. Some
Beecham have reported increased A. Our goal was to manage risk in a very market watchers have predicted a Dow Jones
earnings. volatile market. One way to do so is to Industrial Average well over 7000; others
invest in noncyclical industries like see a drop to below 5000. However, most
Q. ABOUT 19% OF THE FUND'S HOLDINGS food, for example, and other consumer agree that two years in a row of stock
ARE INTERNATIONAL, A LARGER PRO- staples where performance remains returns above 20% is rare; no one knows
if a third year in a row is possible.
GROWTH OF A $10,000 INVESTMENT We think it will be difficult for the
From 05/05/93-12/31/96 market to produce anything like the re-
AIM V.I. S&P 500 LIPPER GROWTH turns of the past two years. The double-
VALUE FUND STOCK INDEX FUNDS INDEX digit earnings growth American corpora-
(In thousands) tions experienced for four years has
5/5/93 $10,000 $10,000 $10,000 slowed. For earnings growth to accelerate
7/30/93 10,690 10,155 10,417 back to the 14% or 15% level will re-
10/29/93 11,370 10,675 11,111 quire a very robust economy.
1/31/94 12,193 11,062 11,564 So far, that has not been the case.
4/29/94 11,793 10,430 10,930 As 1996 closed, economic growth appeared
7/29/94 11,592 10,681 10,906 to have settled at an annual rate of 2.5%,
10/31/94 12,163 11,088 11,338 which may characterize much of 1997. In
1/31/95 11,945 11,123 11,042 recent testimony before Congress, Fed
4/28/95 13,400 12,247 12,131 Chairman Alan Greenspan said, "The economy
7/31/95 15,833 13,462 13,691 has retained considerable vigor, with few
10/31/95 16,146 14,011 14,057 signs of the imbalances and inflationary
1/31/96 16,346 15,412 14,946 tensions that have disrupted past
4/30/96 16,750 15,937 15,634 expansions."
7/31/96 16,387 15,678 14,904
10/31/96 17,862 17,376 16,437
12/31/96 18,721 18,344 17,145
AVERAGE ANNUAL TOTAL RETURN Past performance cannot guarantee comparable
As of 12/31/96 future results.
1 Year 15.02%
Inception (5/5/93) 18.70
The performance figures shown represent the AIM V.I. Value Fund and are not intended
to reflect actual annuity values, and do not reflect charges at the separate account
level which, if applied, would lower the performance results. The Fund's performance
figures are historical and reflect reinvestment of all distributions and changes in
the net asset value. The Fund's investment return and principal value will fluctuate
so that Fund shares, when redeemed, may be worth more or less than their original cost.
Source: Towers Data Systems HYPO--Registered Trademark--.
The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of the
stock market in general. Source: Towers Data Systems HYPO--Registered Trademark--.
The Dow Jones Industrial Average (DJIA) is an unmanaged composite of the performance
of 30 large-company stocks.
Lipper Analytical Services, Inc., is an independent mutual fund performance monitor.
The unmanaged Lipper Growth Fund Index represents an average of the performance of the
30 largest growth mutual funds.
An investment cannot be made in any indexes listed. Index results include reinvested dividends.
</TABLE>
_____________________
OUR GOAL WAS
TO MANAGE RISK
IN A VERY VOLATILE MARKET.
_____________________
AIM V.I. VALUE FUND
86
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 67.67%
AEROSPACE/DEFENSE - 0.88%
Boeing Co. 22,000 $ 2,340,250
- ---------------------------------------------------------------
United Technologies Corp. 14,000 924,000
- ---------------------------------------------------------------
3,264,250
- ---------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES - 0.17%
Borg-Warner Automotive, Inc. 16,000 616,000
- ---------------------------------------------------------------
BEVERAGES (SOFT DRINKS) - 0.29%
PepsiCo, Inc. 37,000 1,082,250
- ---------------------------------------------------------------
BIOTECHNOLOGY - 1.15%
Biogen, Inc.(a) 40,400 1,565,500
- ---------------------------------------------------------------
Guidant Corp. 47,000 2,679,000
- ---------------------------------------------------------------
4,244,500
- ---------------------------------------------------------------
BUSINESS SERVICES - 0.10%
Cognizant Corp. 11,000 363,000
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.82%
IMC Global, Inc. 44,000 1,721,500
- ---------------------------------------------------------------
Praxair, Inc. 28,000 1,291,500
- ---------------------------------------------------------------
3,013,000
- ---------------------------------------------------------------
COMPUTER MAINFRAMES - 0.18%
International Business Machines Corp. 4,500 679,500
- ---------------------------------------------------------------
COMPUTER MINI/PCS - 0.44%
Sun Microsystems, Inc.(a) 22,500 577,969
- ---------------------------------------------------------------
Wang Laboratories, Inc.(a) 52,500 1,063,125
- ---------------------------------------------------------------
1,641,094
- ---------------------------------------------------------------
COMPUTER NETWORKING - 0.51%
Cisco Systems, Inc.(a) 15,000 954,375
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 24,500 926,407
- ---------------------------------------------------------------
1,880,782
- ---------------------------------------------------------------
COMPUTER PERIPHERALS - 0.75%
Seagate Technology, Inc.(a) 29,000 1,145,500
- ---------------------------------------------------------------
U.S. Robotics Corp.(a) 12,400 892,800
- ---------------------------------------------------------------
Western Digital Corp.(a) 13,000 739,375
- ---------------------------------------------------------------
2,777,675
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES - 2.09%
American Management Systems, Inc.(a) 51,000 $ 1,249,500
- ------------------------------------------------------------------
Computer Associates International, Inc. 21,000 1,044,750
- ------------------------------------------------------------------
Compuware Corp.(a) 10,100 506,263
- ------------------------------------------------------------------
Informix Corp.(a) 37,000 753,875
- ------------------------------------------------------------------
National Data Corp. 11,000 478,500
- ------------------------------------------------------------------
Network General Corp.(a) 34,000 1,028,500
- ------------------------------------------------------------------
Wallace Computer Services, Inc. 77,500 2,673,750
- ------------------------------------------------------------------
7,735,138
- ------------------------------------------------------------------
CONGLOMERATES - 0.37%
Loews Corp. 12,700 1,196,975
- ------------------------------------------------------------------
U.S. Industries, Inc.(a) 5,000 171,875
- ------------------------------------------------------------------
1,368,850
- ------------------------------------------------------------------
CONTAINERS - 0.28%
First Brands Corp. 37,000 1,049,875
- ------------------------------------------------------------------
COSMETICS & TOILETRIES - 0.22%
Clorox Co. 8,000 803,000
- ------------------------------------------------------------------
ELECTRIC POWER - 4.90%
Allegheny Power System, Inc. 77,000 2,338,875
- ------------------------------------------------------------------
American Electric Power Co. 94,000 3,865,750
- ------------------------------------------------------------------
Baltimore Gas & Electric Co. 29,000 775,750
- ------------------------------------------------------------------
Consolidated Edison Co. of New York, Inc. 51,000 1,491,750
- ------------------------------------------------------------------
DQE, Inc. 21,000 609,000
- ------------------------------------------------------------------
Duke Power Co. 18,000 832,500
- ------------------------------------------------------------------
Edison International 62,600 1,244,175
- ------------------------------------------------------------------
Entergy Corp. 36,000 999,000
- ------------------------------------------------------------------
FPL Group, Inc. 18,000 828,000
- ------------------------------------------------------------------
Illinova Corp. 32,300 888,250
- ------------------------------------------------------------------
Texas Utilities Co. 21,000 855,750
- ------------------------------------------------------------------
Unicom Corp. 121,200 3,287,550
- ------------------------------------------------------------------
18,016,350
- ------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 0.55%
Merrill Lynch & Co., Inc. 25,000 2,037,500
- ------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 5.24%
Federal Home Loan Mortgage Corp. 18,000 1,982,250
- ------------------------------------------------------------------
Federal National Mortgage Association 363,000 13,521,750
- ------------------------------------------------------------------
Student Loan Marketing Association 41,900 3,901,938
- ------------------------------------------------------------------
19,405,938
- ------------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
87
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
FOOD/PROCESSING - 2.75%
Archer-Daniels-Midland Co. 181,000 $ 3,982,000
- ----------------------------------------------------------------
Flowers Industries, Inc. 50,000 1,075,000
- ----------------------------------------------------------------
Interstate Bakeries Corp. 29,000 1,424,625
- ----------------------------------------------------------------
Nabisco Holdings Corp. - Class A 46,600 1,811,575
- ----------------------------------------------------------------
Ralcorp Holdings, Inc.(a) 38,400 811,200
- ----------------------------------------------------------------
Ralston-Ralston Purina Group 14,600 1,071,275
- ----------------------------------------------------------------
10,175,675
- ----------------------------------------------------------------
FUNERAL SERVICES - 0.86%
Service Corp. International 101,000 2,828,000
- ----------------------------------------------------------------
Stewart Enterprises, Inc. - Class A 10,000 340,000
- ----------------------------------------------------------------
3,168,000
- ----------------------------------------------------------------
GAS DISTRIBUTION - 0.11%
KN Energy, Inc. 10,000 392,500
- ----------------------------------------------------------------
HOME BUILDING - 0.20%
Clayton Homes, Inc. 55,000 742,500
- ----------------------------------------------------------------
HOTELS/MOTELS - 0.09%
Choice Hotels International, Inc.(a) 18,000 317,250
- ----------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.99%
Conseco Inc. 14,300 911,625
- ----------------------------------------------------------------
Provident Companies, Inc. 36,000 1,741,500
- ----------------------------------------------------------------
Safeco Corp. 26,000 1,025,375
- ----------------------------------------------------------------
3,678,500
- ----------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 6.75%
Allstate Corp. 67,500 3,906,563
- ----------------------------------------------------------------
American International Group, Inc. 36,000 3,897,000
- ----------------------------------------------------------------
Chubb Corp. 13,900 747,124
- ----------------------------------------------------------------
CIGNA Corp. 25,000 3,415,625
- ----------------------------------------------------------------
CNA Financial Corp.(a) 14,000 1,498,000
- ----------------------------------------------------------------
Exel Limited 52,000 1,969,500
- ----------------------------------------------------------------
ITT Hartford Group, Inc. 44,000 2,970,000
- ----------------------------------------------------------------
MBIA, Inc. 18,000 1,822,500
- ----------------------------------------------------------------
Progressive Corp. 10,100 680,488
- ----------------------------------------------------------------
Transatlantic Holdings, Inc. 7,200 579,600
- ----------------------------------------------------------------
Travelers Group, Inc. 77,333 3,508,985
- ----------------------------------------------------------------
24,995,385
- ----------------------------------------------------------------
LEISURE & RECREATION - 0.96%
Callaway Golf Co. 51,000 1,466,250
- ----------------------------------------------------------------
Carnival Corp. - Class A 62,900 2,075,700
- ----------------------------------------------------------------
3,541,950
- ----------------------------------------------------------------
MACHINERY (HEAVY) - 0.16%
Case Corp. 11,000 599,500
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
MACHINERY (MISCELLANEOUS) - 0.38%
Pentair, Inc. 43,500 $ 1,402,875
- ---------------------------------------------------------------
MEDICAL (DRUGS) - 4.70%
American Home Products Corp. 36,000 2,110,500
- ---------------------------------------------------------------
Bristol-Meyers Squibb Co. 80,000 8,700,000
- ---------------------------------------------------------------
ICN Pharmaceuticals, Inc. 51,560 1,011,865
- ---------------------------------------------------------------
R.P. Scherer Corp.(a) 18,400 924,600
- ---------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 35,200 2,750,000
- ---------------------------------------------------------------
Schering-Plough Corp. 29,000 1,877,750
- ---------------------------------------------------------------
17,374,715
- ---------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS) - 4.21%
Baxter International, Inc. 274,200 11,242,200
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 22,000 1,320,000
- ---------------------------------------------------------------
Hillenbrand Industries, Inc. 29,400 1,065,750
- ---------------------------------------------------------------
St. Jude Medical, Inc.(a) 29,000 1,236,125
- ---------------------------------------------------------------
Sybron International Corp.(a) 22,000 726,000
- ---------------------------------------------------------------
15,590,075
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 6.13%
Columbia/HCA Healthcare Corp. 311,000 12,673,250
- ---------------------------------------------------------------
Health Care and Retirement Corp.(a) 43,000 1,230,875
- ---------------------------------------------------------------
Manor Care, Inc. 18,000 486,000
- ---------------------------------------------------------------
MedPartners, Inc.(a) 274,050 5,755,050
- ---------------------------------------------------------------
OrNda HealthCorp(a) 66,000 1,930,500
- ---------------------------------------------------------------
Quorum Health Group, Inc.(a) 21,000 624,750
- ---------------------------------------------------------------
22,700,425
- ---------------------------------------------------------------
NATURAL GAS PIPELINE - 1.33%
Columbia Gas System, Inc. 26,000 1,654,250
- ---------------------------------------------------------------
El Paso Natural Gas Co. 64,300 3,247,150
- ---------------------------------------------------------------
4,901,400
- ---------------------------------------------------------------
OFFICE PRODUCTS - 0.35%
Reynolds & Reynolds Co. - Class A 49,600 1,289,600
- ---------------------------------------------------------------
OIL & GAS (REFINING/MARKETING) - 0.47%
Tosco Corp. 22,160 1,753,410
- ---------------------------------------------------------------
OIL & GAS (SERVICES) - 2.80%
Halliburton Co. 17,200 1,036,300
- ---------------------------------------------------------------
Mobil Corp. 11,000 1,344,750
- ---------------------------------------------------------------
NorAm Energy Corp. 36,000 553,500
- ---------------------------------------------------------------
Oryx Energy Co.(a) 146,000 3,613,500
- ---------------------------------------------------------------
Pennzoil Co. 26,000 1,469,000
- ---------------------------------------------------------------
Unocal Corp. 57,400 2,331,875
- ---------------------------------------------------------------
10,348,925
- ---------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
88
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES - 1.65%
Baker Hughes, Inc. 74,000 $ 2,553,000
- ------------------------------------------------------------------------------
BJ Services Co.(a) 26,500 1,351,500
- ------------------------------------------------------------------------------
Noble Drilling Corp.(a) 44,000 874,500
- ------------------------------------------------------------------------------
Tidewater, Inc. 29,200 1,321,300
- ------------------------------------------------------------------------------
6,100,300
- ------------------------------------------------------------------------------
PUBLISHING - 0.47%
Gannett Company, Inc. 12,300 920,963
- ------------------------------------------------------------------------------
Knight-Ridder, Inc. 11,000 420,750
- ------------------------------------------------------------------------------
Scripps Co. (E.W.) - Class A 11,000 385,000
- ------------------------------------------------------------------------------
1,726,713
- ------------------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 0.92%
American Stores Co. 33,000 1,348,874
- ------------------------------------------------------------------------------
Safeway, Inc.(a) 48,000 2,052,000
- ------------------------------------------------------------------------------
3,400,874
- ------------------------------------------------------------------------------
RETAIL (STORES) - 0.05%
Meyer (Fred), Inc.(a) 5,400 191,700
- ------------------------------------------------------------------------------
SHOES & RELATED APPAREL - 0.25%
Nike, Inc. - Class B 15,400 920,150
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS - 4.56%
Lucent Technologies, Inc. 37,100 1,715,874
- ------------------------------------------------------------------------------
MFS Communications Co., Inc.(a) 176,819 9,636,634
- ------------------------------------------------------------------------------
WorldCom, Inc.(a) 210,700 5,491,369
- ------------------------------------------------------------------------------
16,843,877
- ------------------------------------------------------------------------------
TELEPHONE - 3.33%
Ameritech Corp. 115,900 7,026,437
- ------------------------------------------------------------------------------
BellSouth Corp. 72,000 2,907,000
- ------------------------------------------------------------------------------
Cincinnati Bell, Inc. 14,000 862,750
- ------------------------------------------------------------------------------
SBC Communications, Inc. 29,000 1,500,750
- ------------------------------------------------------------------------------
12,296,937
- ------------------------------------------------------------------------------
TOBACCO - 4.26%
DIMON, Inc. 42,000 971,250
- ------------------------------------------------------------------------------
Philip Morris Companies, Inc. 95,000 10,699,375
- ------------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 120,100 4,083,400
- ------------------------------------------------------------------------------
15,754,025
- ------------------------------------------------------------------------------
Total Domestic Common Stocks 250,185,963
- ------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 18.18%
ARGENTINA - 0.38%
YPF Sociedad Anonima - ADR (Oil & Gas - Exploration &
Production) 55,000 1,388,750
- ------------------------------------------------------------------------------
AUSTRALIA - 0.50%
Westpac Banking Corp., Ltd. (Banking) 322,163 1,833,469
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
BERMUDA - 0.02%
PartnerRe Ltd. (Insurance - Multi-Line Property) 2,000 $ 68,000
- ---------------------------------------------------------------------------
BRAZIL - 0.17%
Telecomunicacoes Brasileiras S.A. Telebras - ADR
(Telecommunications) 8,000 612,000
- ---------------------------------------------------------------------------
CANADA - 2.80%
Canadian National Railway Co. (Railroads) 58,000 2,204,000
- ---------------------------------------------------------------------------
Canadian Pacific, Ltd. (Transportation) 224,000 5,936,000
- ---------------------------------------------------------------------------
CanWest Global Communications Corp.
(Advertising/Broadcasting) 63,000 645,750
- ---------------------------------------------------------------------------
Northern Telecom Ltd. (Telecommunications) 15,000 928,125
- ---------------------------------------------------------------------------
Potash Corp. of Saskatchewan Inc. (Chemicals) 7,300 620,500
- ---------------------------------------------------------------------------
10,334,375
- ---------------------------------------------------------------------------
DENMARK - 0.64%
Danisco A.S. (Food/Processing) 19,000 1,154,682
- ---------------------------------------------------------------------------
Novo Nordisk A.S. - Class B (Medical - Drugs) 6,500 1,224,791
- ---------------------------------------------------------------------------
2,379,473
- ---------------------------------------------------------------------------
FRANCE - 0.18%
Rhone-Poulenc Rorer, Inc. - Class A (Medical - Drugs) 19,100 651,207
- ---------------------------------------------------------------------------
GERMANY - 0.47%
VEBA A.G. (Electric Power) 29,900 1,729,335
- ---------------------------------------------------------------------------
HONG KONG - 1.10%
Cheung Kong Holdings Ltd. (Real Estate) 125,000 1,111,093
- ---------------------------------------------------------------------------
Citic Pacific Ltd. (Banking) 170,000 986,877
- ---------------------------------------------------------------------------
First Pacific Company Ltd. (Conglomerates) 276,000 358,627
- ---------------------------------------------------------------------------
Hang Seng Bank Ltd. (Banking) 45,000 546,900
- ---------------------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Real Estate) 91,000 1,114,778
- ---------------------------------------------------------------------------
4,118,275
- ---------------------------------------------------------------------------
ITALY - 1.68%
Edison S.p.A. (Electric Power) 110,000 693,428
- ---------------------------------------------------------------------------
Fila Holding S.p.A. - ADR (Retail - Stores) 14,200 825,375
- ---------------------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A. (Banking) 130,300 1,111,458
- ---------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications) 590,000 1,495,419
- ---------------------------------------------------------------------------
Telecom Italia S.p.A. (Telecommunications) 810,000 2,103,757
- ---------------------------------------------------------------------------
6,229,437
- ---------------------------------------------------------------------------
JAPAN - 0.42%
Bank of Tokyo - Mitsubishi Ltd. (Banking) 700 12,996
- ---------------------------------------------------------------------------
Fuji Photo Film (Leisure & Recreation) 31,000 1,022,538
- ---------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobile - Manufacturers) 18,000 514,463
- ---------------------------------------------------------------------------
1,549,997
- ---------------------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
89
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
NETHERLANDS - 0.90%
Royal Dutch Petroleum Co. (Oil & Gas - Services) 7,300 $ 1,246,475
- ----------------------------------------------------------------------------
VNU - Verenigde Nederlandse Uitgeversbedrijven
Verenigd Bezit (Publishing) 100,000 2,090,935
- ----------------------------------------------------------------------------
3,337,410
- ----------------------------------------------------------------------------
NORWAY - 0.18%
Storebrand A.S.A. (Insurance - Multi-Line
Property)(a) 114,350 656,664
- ----------------------------------------------------------------------------
PHILIPPINES - 0.28%
C & P Homes, Inc. (Home Building) 402,000 206,350
- ----------------------------------------------------------------------------
Filinvest Land Inc. (Real Estate)(a) 793,500 247,404
- ----------------------------------------------------------------------------
Metro Pacific Corp. (Conglomerates) 2,348,000 580,304
- ----------------------------------------------------------------------------
1,034,058
- ----------------------------------------------------------------------------
SPAIN - 1.60%
Banco Popular Espanol S.A. (Banking) 7,000 1,374,928
- ----------------------------------------------------------------------------
Empresa Nacional de Electricidad, S.A.
(Electric Power) 37,500 2,668,977
- ----------------------------------------------------------------------------
Iberdrola S.A. (Electric Power) 131,500 1,863,740
- ----------------------------------------------------------------------------
5,907,645
- ----------------------------------------------------------------------------
SWEDEN - 1.20%
Hennes & Mauritz A.B. - B Shares (Retail - Stores) 11,000 1,522,603
- ----------------------------------------------------------------------------
Nordbanken A.B. (Banking) 9,150 277,053
- ----------------------------------------------------------------------------
Skandinaviska Enskilda Banken - Class A (Banking) 150,000 1,539,612
- ----------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - ADR
(Telecommunications) 36,000 1,086,750
- ----------------------------------------------------------------------------
4,426,018
- ----------------------------------------------------------------------------
SWITZERLAND - 1.82%
Novartis A.G. (Medical - Drugs)(a) 5,866 6,718,743
- ----------------------------------------------------------------------------
THAILAND - 0.18%
Krung Thai Bank PLC (Banking) 215,300 415,556
- ----------------------------------------------------------------------------
Thai Farmers Bank PLC (Banking) 37,900 236,450
- ----------------------------------------------------------------------------
Thai Farmers Bank PLC - Wts., expiring 09/15/02
(Banking)(a) 5,000 4,728
- ----------------------------------------------------------------------------
656,734
- ----------------------------------------------------------------------------
UNITED KINGDOM - 3.66%
Granada Group PLC (Leisure & Recreation) 160,000 2,365,598
- ----------------------------------------------------------------------------
Railtrack Group PLC (Railroads) 125,000 829,836
- ----------------------------------------------------------------------------
SmithKline Beecham PLC - ADR (Medical - Drugs) 110,000 7,480,000
- ----------------------------------------------------------------------------
Standard Chartered PLC (Finance - Asset Management) 160,000 1,976,358
- ----------------------------------------------------------------------------
Unilever PLC (Consumer Non-Durables) 38,000 922,169
- ----------------------------------------------------------------------------
13,573,961
- ----------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 67,205,551
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
PREFERRED STOCKS - 0.37%
INSURANCE (LIFE & HEALTH) - 0.11%
Conseco Inc. - $4.278 Conv. PRIDES 3,600 $ 409,500
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.26%
MFS Communications Company, Inc. -
$2.68 Conv. Pfd. 10,400 949,000
- -----------------------------------------------------------------------------
Total Preferred Stocks 1,358,500
- -----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
CONVERTIBLE CORPORATE BONDS - 0.23%
COMPUTER SOFTWARE/SERVICES - 0.23%
First Financial Management Corp., Conv. Deb., 5.00%,
12/15/99 $ 500,000 865,285
- -----------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 4.22%
U.S. TREASURY BILLS(b) - 4.22%
5.22%, 01/02/97 9,175,000 9,173,669
- -----------------------------------------------------------------------------
5.16%, 03/06/97 6,500,000 6,444,815
- -----------------------------------------------------------------------------
Total U.S. Treasury Securities 15,618,484
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS(c) - 9.05%
Daiwa Securities America, Inc.
6.25%, 01/02/97(d) 33,466,561 33,466,561
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.72% 368,700,344
- -----------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.28% 1,034,802
- -----------------------------------------------------------------------------
NET ASSETS - 100.00% $369,735,146
=============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(c) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Abbreviations:
ADR- American Depository Receipt
Conv.- Convertible
Deb.- Debentures
Pfd.- Preferred
PRIDES- Preferred Redemption Increase Dividend Equity Security
Wts.- Warrants
See Notes to Financial Statements.
AIM V.I. VALUE FUND
90
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $318,691,166) $368,700,344
- ----------------------------------------------------------------------
Foreign currencies, at market value (cost $3,526,022) 3,502,077
- ----------------------------------------------------------------------
Receivables for:
Investments sold 1,301,331
- ----------------------------------------------------------------------
Capital stock sold 188,978
- ----------------------------------------------------------------------
Dividends and interest 675,049
- ----------------------------------------------------------------------
Investment for deferred compensation plan 12,897
- ----------------------------------------------------------------------
Organizational costs, net 3,856
- ----------------------------------------------------------------------
Other assets 1,173
- ----------------------------------------------------------------------
Total assets 374,385,705
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 3,030,159
- ----------------------------------------------------------------------
Capital stock reacquired 82,384
- ----------------------------------------------------------------------
Options written 1,268,208
- ----------------------------------------------------------------------
Deferred compensation 12,897
- ----------------------------------------------------------------------
Accrued advisory fees 194,159
- ----------------------------------------------------------------------
Accrued directors' fees 1,800
- ----------------------------------------------------------------------
Accrued administrative services fees 4,651
- ----------------------------------------------------------------------
Accrued operating expenses 56,301
- ----------------------------------------------------------------------
Total liabilities 4,650,559
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $369,735,146
======================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 21,152,339
- ----------------------------------------------------------------------
Net asset value, offering and redemption price per share $17.48
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $114,260 foreign withholding tax) $ 5,244,028
- ----------------------------------------------------------------------------
Interest 3,073,729
- ----------------------------------------------------------------------------
Total investment income 8,317,757
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,955,091
- ----------------------------------------------------------------------------
Custodian fees 134,690
- ----------------------------------------------------------------------------
Administrative service fees 47,116
- ----------------------------------------------------------------------------
Directors' fees and expenses 7,749
- ----------------------------------------------------------------------------
Organizational costs 2,892
- ----------------------------------------------------------------------------
Other 77,745
- ----------------------------------------------------------------------------
Total expenses 2,225,283
- ----------------------------------------------------------------------------
Net investment income 6,092,474
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 17,324,865
- ----------------------------------------------------------------------------
Foreign currencies (31,597)
- ----------------------------------------------------------------------------
Futures contracts 363,031
- ----------------------------------------------------------------------------
Option contracts 1,659,582
- ----------------------------------------------------------------------------
19,315,881
- ----------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 20,887,238
- ----------------------------------------------------------------------------
Foreign currencies (44,227)
- ----------------------------------------------------------------------------
Futures contracts (773,579)
- ----------------------------------------------------------------------------
Option contracts (148,303)
- ----------------------------------------------------------------------------
19,921,129
- ----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, futures
and option contracts 39,237,010
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $45,329,484
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. VALUE FUND
91
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,092,474 $ 1,836,245
- ------------------------------------------------------------------------------
Net realized gain on sales of investment
securities, foreign currencies, futures and
option contracts 19,315,881 19,312,304
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities, foreign currencies and
option contracts 19,921,129 25,543,678
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 45,329,484 46,692,227
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (1,864,217) (124,487)
- ------------------------------------------------------------------------------
Distributions to shareholders from realized
capital gains (18,073,097) --
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 87,131,189 101,386,580
- ------------------------------------------------------------------------------
Net increase in net assets 112,523,359 147,954,320
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 257,211,787 109,257,467
- ------------------------------------------------------------------------------
End of period $369,735,146 $257,211,787
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $295,686,862 $208,555,673
- ------------------------------------------------------------------------------
Undistributed net investment income 6,016,241 1,819,581
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
option contracts 18,215,756 16,941,375
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 49,816,287 29,895,158
- ------------------------------------------------------------------------------
$369,735,146 $257,211,787
==============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Value Fund (the "Fund"). The Fund's investment objective is to
achieve long-term growth of capital by investing primarily in equity securities
judged by AIM to be undervalued relative to the current or projected earnings
of the companies issuing the securities or relative to current market values of
assets owned by the companies issuing the securities or relative to the equity
market generally. Income is a secondary objective. Currently, shares of the
Fund are sold only to insurance company separate accounts to fund the benefits
of variable annuity contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date, or absent a last sales price, at the mean of the closing bid
and asked prices. Debt obligations are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market quotations are either not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates are also generally determined prior to the
close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the
times at which they are determined and the close of the New York Stock
Exchange which
AIM V.I. VALUE FUND
92
<PAGE>
will not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis. On December 31, 1996,
undistributed net investment income was reduced by $31,597 and
undistributed net realized gains increased by $31,597 in order to comply
with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
C. Federal Income Taxes - For federal income tax purposes, each portfolio
in the Company is taxed as a separate entity. It is the Fund's policy to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income and capital gains to its shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
D. Organizational Costs - Organizational costs for the Fund of $14,461 are
being amortized over five years.
E. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contract may not correlate with changes in the securities being hedged.
F. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
G. Forward Currency Contracts - A forward currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a forward currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a currency contract for
the amount of a purchase or sale of a security denominated in a foreign
currency in order to "lock-in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
H. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "market-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1996, AIM was reimbursed $47,116 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the
Fund's shares.
AIM V.I. VALUE FUND
93
<PAGE>
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1996, the Fund incurred legal fees of
$3,429 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest a director's
fees, if so elected by such director, in mutual fund shares in accordance with
a deferred compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the year ended December 31, 1996 was
$439,133,676 and $345,174,079, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $53,930,337
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (4,175,590)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $49,754,747
==========================================================================
Cost of investments for tax purposes is $318,945,597.
</TABLE>
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Sold 5,143,694 $86,219,671 6,903,801 $103,653,052
- ------------------------- ---------- ----------- --------- ------------
Issued as reinvestment of
distributions 1,179,025 19,937,315 7,829 124,487
- ------------------------- ---------- ----------- --------- ------------
Reacquired (1,140,219) (19,025,797) (176,240) (2,390,959)
- ------------------------- ---------- ----------- --------- ------------
5,182,500 $87,131,189 6,735,390 $101,386,580
========== =========== ========= ============
</TABLE>
NOTE 6 - OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1996
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
--------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of period -- --
Written 8,940 $2,897,960
Closed (1,605) (622,960)
Exercised (2,023) (832,926)
Expired (1,825) (322,169)
------ ----------
End of period 3,487 $1,119,905
====== ==========
</TABLE>
Open call option contracts written at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1996 MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
----- -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Boston Scientific Corp. Jan. 50 100 $ 34,699 $ 103,125 $ (68,426)
Case Corp. Jul. 55 110 55,553 47,437 8,116
Clorox Co. Jan. 95 80 44,918 46,000 (1,082)
Comverse Technology,
Inc. Jan. 40 70 31,569 7,875 23,694
Fila Holding S.p.A. -
ADR Jan. 75 120 84,018 1,500 82,518
Informix Corp. Jan. 20 350 55,823 47,031 8,792
Lucent Technologies,
Inc. Jan. 40 200 67,198 130,000 (62,802)
Lucent Technologies,
Inc. Jan. 45 140 52,498 29,750 22,748
MedPartners, Inc. Mar. 22.5 500 134,183 43,750 90,433
Merrill Lynch & Co.,
Inc. Jan. 75 100 43,290 70,001 (26,711)
Mobil Corp. Jan. 115 110 75,138 84,562 (9,424)
Nike Inc. - Class B Jan. 60 140 38,219 26,250 11,969
Northern Telecom Ltd. Jan. 60 70 25,094 22,312 2,782
PepsiCo, Inc. Jan. 30 350 115,817 16,406 99,411
Travelers Group, Inc. Mar. 33.75 267 102,637 333,334 (230,697)
United Technologies
Corp. Jan. 65 40 12,831 7,000 5,831
United Technologies
Corp. Jan. 67.5 40 8,805 2,500 6,305
WorldCom, Inc. Jan. 22.5 700 137,615 249,375 (111,760)
----- ---------- ---------- ---------
3,487 $1,119,905 $1,268,208 $(148,303)
===== ========== ========== =========
</TABLE>
AIM V.I. VALUE FUND
94
<PAGE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, the eleven months ended December 31,
1995, the year ended January 31, 1995, and the period May 5, 1993 (date
operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
--------------------- ------------------
1996 1995 1995 1994
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 16.11 $ 11.83 $ 12.17 $ 10.00
- ------------------------- -------- -------- -------- -------
Income from investment
operations:
Net investment income 0.30 0.11 0.10 0.02
- ------------------------- -------- -------- -------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 2.09 4.18 (0.35) 2.17
- ------------------------- -------- -------- -------- -------
Total from investment
operations 2.39 4.29 (0.25) 2.19
- ------------------------- -------- -------- -------- -------
Less distributions:
Dividends from net
investment income (0.10) (0.01) (0.09) (0.02)
- ------------------------- -------- -------- -------- -------
Dividends from realized
capital gains (0.92) -- -- --
- ------------------------- -------- -------- -------- -------
Total distributions (1.02) (0.01) (0.09) (0.02)
- ------------------------- -------- -------- -------- -------
Net asset value, end of
period $ 17.48 $ 16.11 $ 11.83 $ 12.17
- ------------------------- -------- -------- -------- -------
Total return(a) 15.02% 36.25% (2.03)% 21.94%
- ------------------------- -------- -------- -------- -------
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $369,735 $257,212 $109,257 $38,255
- ------------------------- -------- -------- -------- -------
Ratio of expenses to
average net assets 0.73%(b) 0.75%(c) 0.82% 1.00%(c)(d)
- ------------------------- -------- -------- -------- -------
Ratio of net investment
income to average net
assets 2.00%(b) 1.11%(c) 1.17% 0.51%(c)(d)
- ------------------------- -------- -------- -------- -------
Portfolio turnover rate 129% 145% 143% 87%
- ------------------------- -------- -------- -------- -------
Average broker commission
rate(e) $ 0.0429 N/A N/A N/A
- ------------------------- -------- -------- -------- -------
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $304,940,393.
(c) Annualized.
(d) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees and/or expense reimbursements were
1.35% and 0.16%, respectively.
(e) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
NOTE 8 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger pursuant
to which AIM Management will be merged with and into a direct wholly-owned
subsidiary of INVESCO plc. AIM Management is the parent company of the Fund's
advisor. The merger is expected to take place during the first quarter of 1997.
AIM V.I. VALUE FUND
95
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Value Fund, a series of shares of common stock of AIM Variable Insurance
Funds, Inc. including the schedule of investments as of December 31, 1996, the
related statement of operations for the year then ended, the statement of
changes in net assets for the year then ended and the eleven month period ended
December 31, 1995 and the financial highlights for the year then ended, the
eleven month period ended December 31, 1995, the year ended January 31, 1995 ,
and the period May 5, 1993 (commencement of operations) through January 31,
1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. Where
brokers did not reply to our confirmation requests, we carried out other
appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Value Fund, as of December 31, 1996, the results of its operations for the
year then ended, the changes in its net assets for the year then ended and the
eleven month period ended December 31, 1995 and the financial highlights for
the year then ended, the eleven month period ended December 31, 1995, the year
ended January 31, 1995, and the period May 5, 1993 (commencement of operations)
through January 31, 1994, in conformity with generally accepted accounting
principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. VALUE FUND
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DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE Chairman and Chief Executive Officer Chairman Suite 1919
INSURANCE FUNDS, A I M Management Group Inc. Houston, TX 77046
INC. Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Formerly Director, President and Chief INVESTMENT ADVISOR
Executive Officer John J. Arthur
COMSAT Corporation Senior Vice President and A I M Advisors, Inc.
Treasurer 11 Greenway Plaza
Owen Daly II Suite 1919
Director Gary T. Crum Houston, TX 77046
Cortland Trust Inc. Senior Vice President
TRANSFER AGENT AND CUSTODIAN
Carl Frischling Scott G. Lucas
Partner Senior Vice President State Street Bank & Trust Co.
Kramer, Levin, Naftalis & Frankel 225 Franklin Street
Carol F. Relihan Boston, MA 02110
Robert H. Graham Senior Vice President and
President and Chief Operating Officer Secretary COUNSEL TO THE FUNDS
A I M Management Group Inc.
Dana R. Sutton Freedman, Levy, Kroll &
John F. Kroeger Vice President and Simonds
Formerly, Consultant Assistant Treasurer 1050 Conn. Avenue, N.W.
Wendell & Stockel Associates, Inc. Washington, D.C. 20036
Robert G. Alley
Lewis F. Pennock Vice President COUNSEL TO THE DIRECTORS
Attorney
Stuart W. Coco Kramer, Levin, Naftalis & Frankel
Ian W. Robinson Vice President 919 Third Avenue
Consultant; Formerly Executive Vice New York, NY 10022
President and Chief Financial Officer Bell Melville B. Cox
Atlantic Management Services, Inc. Vice President DISTRIBUTOR
Louis S. Sklar Karen Dunn Kelley A I M Distributors, Inc.
Executive Vice President Vice President 11 Greenway Plaza
Hines Interests Suite 1919
Limited Partnership Jonathan C. Schoolar Houston, TX 77046
Vice President
INDEPENDENT AUDITORS
P. Michelle Grace
Assistant Secretary Tait, Weller & Baker
Two Penn Center Plaza
David L. Kite Suite 700
Assistant Secretary Philadelphia, PA 19102
Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
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